Los Angeles Community College District
Report on Audited Basic Financial Statements
June 30, 2003
LOS ANGELES COMMUNITY COLLEGE DISTRICT
June 30, 2003
Los Angeles County, California:
•
East Los Angeles College
•
Los Angeles City College
•
Los Angeles Harbor College
•
Los Angeles Mission College
•
Los Angeles Pierce College
•
Los Angeles Southwest College
•
Los Angeles Trade Technical College
•
Los Angeles Valley College
•
West Los Angeles College
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Table of Contents
Page
Introduction:
Chancellor’s Message
Management’s Discussion and Analysis
Independent Auditors’ Report
i
1
13
Basic Financial Statements:
Statement of Net Assets
15
Statement of Revenues, Expenses, and Changes in Net Assets
17
Statement of Cash Flows
18
Notes to Basic Financial Statements
19
Supplemental Financial Information:
General Fund:
Balance Sheet
37
Statement of Revenues, Expenditures, and Changes in Fund Balances
38
Special Revenue Funds:
Combined Balance Sheet
39
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
40
Debt Service Fund:
Balance Sheet
41
Statement of Revenues, Expenditures, and Changes in Fund Balances
42
Building Fund:
Balance Sheet
43
Statement of Revenues, Expenditures, and Changes in Fund Balances
44
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Table of Contents
Page
Expendable Trust Fund – Associated Student Organization Funds and Agency Funds:
Combined Balance Sheet
45
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
46
Other Supplemental Information:
Organization
47
Schedule of Full-Time Equivalent Students and Apprenticeship Clock Hours
49
Reconciliation of Annual Financial and Budget Report (CCFS 311) with Audited Financial
Statements
50
Schedule of Expenditures of Federal and State Awards
51
Notes to Schedule of Expenditures of Federal and State Awards
53
Independent Auditors’ Report on State Compliance Requirements
55
Additional Reports of Independent Auditors:
Report on Compliance and on Internal Control over Financial Reporting Based on an Audit
of Financial Statements Performed in Accordance with Government Auditing Standards
57
Report on Compliance with Requirements Applicable to Each Major Program and on
Internal Control over Compliance in Accordance with OMB Circular A-133
59
Schedule of Findings and Questioned Costs
61
Schedule of State Findings and Recommendations
66
Schedule of Prior Year State Findings
69
Report to Management
76
INTRODUCTION
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
This section presents Management’s Discussion and Analysis (MD&A) of the Los Angeles Community College
District’s (the District) financial activities during the fiscal year ended June 30, 2003. The discussion has been
prepared by management and should be read in conjunction with the basic financial statements and the notes
thereto, which follow this section.
Financial Highlights
•
The assets of the District exceeded its liabilities as of June 30, 2003 by $277.9 million (net assets). Of
this amount, $7.6 million (unrestricted net assets) may be used to meet the District’s ongoing
obligations and $45.2 million (restricted net assets) may be used for the District’s ongoing obligations
related to programs with external restrictions. The remaining component of the District’s net assets
represents $225 million of amounts invested in capital assets, net of related debt.
•
The District’s total net assets decreased $2.8 million during the fiscal year ended June 30, 2003. A
significant portion of the decrease in the District’s net assets was a result of increases in operating
expenses incurred in the fiscal year ended June 30, 2003.
•
The District’s investment in capital assets increased by $72.6 million or 17.1% during the year ended
June 30, 2003. During the fiscal year 2003, the District acquired one additional property, the Van De
Kamp Satellite Building for Los Angeles City College, valued at $6.75 million. Capital construction
projects related to the Proposition A Bonds accounted for $62.9 million in construction in progress at
June 30, 2003.
•
The District’s total long-term debt decreased by $11 million or 1.7% during the fiscal year ended June
30 2003.
Overview of the Financial Statements
Effective July 1, 2001, the District implemented new financial reporting changes established by the
Governmental Accounting Standards Board (GASB) Statement No. 34, Financial Statements – and
Management’s Discussion and Analysis – for State and Local Governments, and GASB Statement No. 35, Basic
Financial Statements – and Management’s Discussion and Analysis – for Public Colleges and Universities.
These statements require the District to report its financial statements as the institution wide under the
business-type activity reporting model, instead of the traditional reporting by fund type. In addition to GASB
Statements Nos. 34 and 35, the District was also required to adopt the provisions of GASB Statement No. 37,
Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments:
Omnibus, Statement No. 38, Certain Financial Statement Note Disclosures, and GASB Interpretation No. 6,
Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial
Statements.
1
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
This Management’s Discussion and Analysis is intended to serve as an introduction to the District’s basic
financial statements. The Districts basic financial statements include four components: (1) Statement of Net
Assets; (2) Statement of Revenues, Expenses, and Changes in Net Assets; (3) Statement of Cash Flows; and
(4) Notes to the Basic Financial Statements. This report also contains other supplementary information in
addition to the basic financial statements themselves.
The Statement of Net Assets represents the entire District’s combined assets, liabilities, and net assets, including
Associated Student Organization financial information. Changes in total net assets as presented on the Statement
of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net
Assets. The Statement of Revenues, Expenses, and Changes in Net Assets represents the revenues received,
operating and nonoperating, and any other revenues, expenses, gains, and losses received or spent by the District.
The Statement of Cash Flows presents detailed information about the cash activity of the District during the year.
The purpose of these financial statements is to summarize the financial information of the District, as a whole,
and to present a long-term view of the District’s finances.
Statement of Net Assets
The Statement of Net Assets presents the assets, liabilities, and net assets of the District as of the end of the fiscal
year. The Statement of Net Assets is a point in time financial statement. The purpose of the Statement of Net
Assets is to present to the readers of the financial statements a fiscal snapshot of the Los Angeles Community
College District. The Statement of Net Assets presents end-of-year data concerning assets (current and
noncurrent), liabilities (current and noncurrent), and net assets (assets minus liabilities). From the data presented,
readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the
institution. Readers are also able to determine how much the institution owes vendors, investors, and lending
institutions.
Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their
availability for expenditure by the institution. Net assets are divided into three major categories. The first
category, invested in capital assets, net of related debt, provides the institution’s equity in property, plant, and
equipment owned by the institution. The second net asset category is restricted net assets, which is divided into
two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only
available for investment purposes. Expendable restricted net assets are available for expenditure by the institution
but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose
restrictions on the use of the assets. The final net asset category is unrestricted net assets. Unrestricted assets are
available to the institution for any lawful purpose of the institution.
Statement of Revenue, Expenses, and Changes in Net Assets
Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the
Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the
revenues received by the District, operating and nonoperating, and any other revenues, expenses, gains, and
losses received or spent by the District.
Generally speaking, operating revenues are received for providing goods and services to the various customers
and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods
and services provided in return for the operating revenues and to carry out the mission of the District.
2
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
Nonoperating revenues are revenues received for which goods and services are not provided. For example, state
appropriations are nonoperating because they are provided by the Legislature to the institution without the
Legislature directly receiving commensurate goods and services for those revenues.
Financial Analysis of the District as a Whole
As of June 30, 2003, the District’s net assets have decreased slightly to $277.9 million from $280.7 million at
June 30, 2002. The $2.8 million decrease in net assets resulted from a $58.4 million decrease in current and other
assets, a $59.7 million increase in capital assets, a $15.4 million increase in current liabilities, and a $11.3 million
decrease in long-term liabilities.
Summary Schedule of Net Assets
June 30, 2003 and 2002
2002
Increase
(decrease)
$ 665,603,529
329,296,359
724,038,857
269,562,403
(58,435,328)
59,733,956
994,899,888
993,601,260
1,298,628
98,204,326
618,829,829
82,775,608
630,105,617
15,428,718
(11,275,788)
717,034,155
712,881,225
4,152,930
225,070,619
45,157,196
7,637,918
220,240,967
50,760,277
9,718,791
4,829,652
(5,603,081)
(2,080,873)
$ 277,865,733
280,720,035
(2,854,302)
2003
Assets:
Current and other assets
Capital assets, net
Total assets
Liabilities:
Current liabilities
Noncurrent liabilities
Total liabilities
Net assets:
Invested in capital assets, net of debt
Restricted – expendable
Unrestricted
Total net assets
In 2003, the District spent $72.6 million in capital assets and depreciated $12.9 million of such assets. This
resulted in part in a $46.6 million decrease in short-term investments and $19 million decrease in receivables,
which contributed to a $58.4 million reduction in current assets.
The $15.4 million increase in current liabilities is due in part to a $9.6 million increase in vendor payables, a $5.3
million increase in current liabilities for debt service payments, and a $2.6 decrease in amounts held in Trust
accounts for others.
3
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
The $11.3 million net decrease in long-term liabilities is partially due a net $21 million decrease in long-term
debt liabilities, and a $2.6 million increase in accrued vacation benefits. This decrease was offset by a $10
million increase in the Districts’ provision for additional workers’ compensation liabilities. The increase is a
result of a recent actuarial study that recommended an increase in the workers’ compensation liabilities from $22
million to $33 million.
Net Assets, June 30, 2003
$277,865,733
Total net assets
$7,637,918
Unrestricted
$45,157,196
Restricted – expendable
Invested in capital assets,
net of related debt
$225,070,619
0
50,000,000
100,000,000 150,000,000 200,000,000 250,000,000 300,000,000
Net Assets, June 30, 2002
$280,720,035
Total net assets
$9,718,791
Unrestricted
$50,760,277
Restricted – expendable
Invested in capital assets,
net of related debt
$220,240,967
0
50,000,000
100,000,000
150,000,000
4
200,000,000
250,000,000
300,000,000
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
As noted earlier, net assets may serve over time as a useful indicator of the District’s financial position. In the
case of the District, assets exceeded liabilities by $277.9 million at June 30, 2003. A significant portion of the
District’s net assets represents $468 million of short-term investments and $329.2 million of capital assets. As
stated earlier, the District spent $72.6 million for additional capital assets. These capital asset expenditures are
included in the Statement of Net Assets. Also, the District depreciated its capital assets by approximately
$12.9 million for the year ended June 30, 2003 resulting in a net increase in capital assets of $59.7 million. The
District’s net assets also include $594 million of long-term debt. The majority of the District’s long-term debt is
used to fund the construction and acquisition of capital assets.
The Statement of Revenues, Expenses, and Changes in Net Assets reflects an unfavorable year with a decrease of
$2.8 million in the net assets at the end of the year as explained below.
In 2003, operating revenue for grant and contracts, noncapital resulted in a net decrease of $22.1 million, which
includes a $10 million increase in federal funded programs, a $5.9 million decrease in state-funded categorical
programs, and a $26.2 million decrease in local revenue due to the absence of the $27.7 million of the 2001
COPS proceeds, which was received in 2002. Other operating revenue decreased $1.7 million.
Nonoperating revenue includes a $12 million increase in property tax collection, a $6 million decrease in
investment income, and a $11 million increase in other nonoperating revenue. The $11 million increase in other
nonoperating revenue includes $17.9 million revenue from the Los Angeles County Treasurer to pay the first
principal payment of $17.9 million for the Proposition A General Obligation Bond.
Operating expenses increased $22.7 million, due primarily to a $2.8 million decrease in salaries resulting from
the District’s midyear class offerings reduction and hiring freeze and a $27 million increase in employee benefits,
which includes a $15.5 million increase in statutory and health benefits, a $11 million increase in accrued
workers’ compensation, and a $2.6 million increase in accrued vacation benefits.
5
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
Summary Schedule of Revenues, Expenses, and Changes in Net Assets
Years ended June 30, 2003 and 2002
Revenues:
Operating revenues:
Net tuition and fees
Grants and contracts, noncapital
Other
Nonoperating revenues:
State apportionments, noncapital
Property taxes
Investment income
Other
Other revenues:
State apportionments, capital
Local property taxes and
revenues, capital
$
Total revenues
Expenses:
Operating expenses:
Salaries
Employee benefits
Supplies, materials, and other
operating expenses and
services
Other
Total operating expenses
Nonoperating expenses:
Interest expense
Other
Total expenses
Change in net assets
$
2003
2002
Change
32,163,334
131,284,428
30,628,208
32,395,058
153,392,268
32,381,699
(231,724)
(22,107,840)
(1,753,491)
250,047,306
118,266,341
24,979,696
38,091,833
250,234,337
106,208,590
31,260,449
26,687,735
(187,031)
12,057,751
(6,280,753)
11,404,098
13,545,470
20,394,552
(6,849,082)
2,078,201
4,275,975
(2,197,774)
641,084,817
657,230,663
(16,145,846)
327,070,110
96,956,596
329,944,145
69,882,112
(2,874,035)
27,074,484
185,546,720
19,071,982
189,192,101
16,865,211
(3,645,381)
2,206,771
628,645,408
605,883,569
22,761,839
4,331,558
10,962,154
1,612,746
9,179,492
2,718,812
1,782,662
643,939,120
616,675,807
27,263,313
(2,854,303)
40,554,856
(43,409,159)
Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net
Assets are as follows:
• The decrease in net assets of $2.8 million represents the degree to which increases in ongoing expenses
exceeded increases in ongoing revenues.
6
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
• Operating revenues include $32.1 million in tuition and fees, $88.0 million in federal grants and
contracts, $31.3 million in state grants and contracts, $11.9 million in local grants and contracts, and
$30.6 million in auxiliary enterprise sales and charges.
• Nonoperating revenues include state apportionments, local property taxes, interest income, and other
miscellaneous nonoperating revenues. State apportionments are at $250 million. Property taxes
increased by $12 million due to increased property tax collection. The largest component of the
District’s nonoperating revenues is state apportionments and local property taxes which represent 85%
of nonoperating revenues for the years ended June 30, 2003 and 2002.
2003 Revenues by Source
$15,623,670
$194,075,971
Operating Revenues
Nonoperating Revenues
Other Revenues
$416,091,464
2002 Revenues by Source
$24,670,527
$218,169,025
Operating Revenues
Nonoperating Revenues
Other Revenues
$414,391,111
7
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
Salary expenses represent 52% of the District’s total operating expenses. Salary expenses decreased by $2.8
million in 2003. Employee benefits increased by $27 million due to the significant increase in workers’
compensation liabilities and an $15 million increase in statutory and health benefits.
2003 Operating Expenses
Salaries
$12,895,875
$6,176,107
Employee Benefits
$185,546,720
$327,070,110
Supplies, Materials,
and Other Operating
Expenses
Utilities
$96,956,596
Depreciation
8
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
2002 Operating Expenses
Salaries
$10,968,462
$5,896,749
Employee Benefits
$189,192,101
Supplies, Materials,
and Other Operating
Expenses
$329,944,145
Utilities
$69,882,112
Depreciation
9
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
Capital Assets and Debt Administration
Capital Assets
The District’s investment in capital assets as of June 30, 2003 and 2002 totaled $329.3 million and
$269.6 million, respectively (net of accumulated depreciation). This investment is comprised of a broad range of
capital assets including land, buildings, construction in progress, works of art, infrastructure and machinery, and
equipment. All capital assets are capitalized and depreciated. The following schedules summarize the activity of
the District’s capital assets for the years ended June 30, 2003 and 2002:
Capital Assets, Net
2003
Land
Land improvements
Buildings
Construction in progress
Works of art
Equipment
Infrastructure
Balance at
July 1, 2002
Additions
32,499,839
30,812,500
286,104,044
35,397,727
518,000
34,568,887
2,895,800
—
43,597
4,434,988
63,958,023
—
4,193,223
—
—
—
—
—
—
—
—
32,499,839
30,856,097
290,539,032
99,355,750
518,000
38,762,110
2,895,800
422,796,797
72,629,831
—
495,426,628
(153,234,394)
(12,895,875)
—
(166,130,269)
$ 269,562,403
59,733,956
—
329,296,359
$
Total
Less accumulated depreciation
Net capital assets
Disposals
Balance at
June 30, 2003
Capital Assets, Net
2002
Land
Land improvements
Buildings
Construction in progress
Works of art
Equipment
Infrastructure
Total
Less accumulated depreciation
Net capital assets
Balance at
July 1, 2001
Additions
18,651,839
30,812,500
277,821,241
7,901,159
436,000
32,076,960
2,895,800
13,848,000
—
8,282,803
27,496,568
82,000
2,512,338
—
—
—
—
—
—
(20,411)
—
32,499,839
30,812,500
286,104,044
35,397,727
518,000
34,568,887
2,895,800
370,595,499
52,221,709
(20,411)
422,796,797
(142,265,932)
(10,968,462)
—
(153,234,394)
$ 228,329,567
41,253,247
(20,411)
269,562,403
$
10
Disposals
Balance at
June 30, 2002
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
For the years ended June 30, 2003, the District recorded an additional $72.6 million in capital assets and
$12.0 million in depreciation. During the year ended June 30, 2003, the District’s investments in facility master
plans, construction, and building improvements increased due to funding from Proposition A, which is recorded
in the District’s Building Fund. The District had a significant number of building projects ongoing funded from
Proposition A Bond money. A total of $54 million of Proposition A bond funds were spent for assets under
construction. In addition, the District acquired property at a cost of $6.7 million for the Los Angeles City
College.
Long-Term Debt
At June 30, 2003 and 2002, the District had $593.6 million and $610.0 million in long-term debt, respectively.
The District’s long-term debt decreased during the year ended June 30, 2003 as a result of the refunding of 1992
Series A COPS and debt services payments for other COPS series.*
Summary of Outstanding Long-Term Debt
June 30, 2003 and 2002
Refunding COPS:
1992 Series A
1993 Series A
1999 Series A
2001 Series A
2002 Series A
General obligation bonds
Total long-term debt
2003
2002
$
—
4,505,000
6,385,000
27,310,000
48,335,000
507,030,000
44,570,000
5,830,000
6,730,000
27,785,000
—
525,000,000
$
593,565,000
609,915,000
* All outstanding COPS were paid off subsequent to June 30, 2003 from Proposition AA – General Obligation
Bond proceeds.
Further information regarding the District’s capital assets and long-term debt can be found in notes 6, 10, and 12
in the accompanying notes to the basic financial statements.
11
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Management’s Discussion and Analysis
June 30, 2003
Economic Factors
State Economy
As the state of California still anticipates a $14 billion deficit, the District continues to have difficulty
maintaining program funding levels while faced with the uncertainty of a state revenue reduction. The District
receives more than 75% of its general operating funds from state apportionment and property taxes. The 2002-03
midyear reduction adversely affected the District’s financial condition. The District has begun taking drastic
measures in response to the state financial crisis. The measures include a 5% reduction in course offerings in
2003-04, a hiring and purchasing freeze, retirement incentives, and staffing changes to contain expenditures. The
District established a 2% ($7.8 million) for fiscal year 2003-2004 and a 3% ($12 million) for fiscal year
2004-2005 Contingency Reserve to cover unforeseen events. However, the state deficit problem will continue to
be a challenge for the District in its attempt to prioritize its resources and reduce costs in the next two years.
Capital Projects
In April 2001, the District became the first community college district in the state of California to pass a property
tax financed bond, Proposition A, under the new requirements of the Strict Accountability in Local School
Construction Act of 2000. Valued at $1.245 billion, the District’s Proposition A Bond Construction Program
(Program) stands as one of the largest community college bonds ever passed in California. The bond measure
was designed to implement a capital improvement program for each of the nine colleges within the Los Angeles
Community College District. The Program is intended to increase educational opportunities, raise student
achievement, and improve health and safety conditions at the nine colleges within the District. These
improvements will be accomplished through such things as the replacement and/or repair and rehabilitation of
deteriorating buildings, the construction, furnishing, and equipping of classrooms, laboratories, libraries, and
related facilities.
In May 2003, the District passed another General Obligation Bond – Proposition AA, for $980 million. The bond
measure was designed to finance construction, building acquisition, equipment, and improvement of college and
support facilities at the various campuses of the District and refinance other outstanding debts of the District and
colleges. The District is in a major capital construction program that will continue for the next several years. Of
the total $2.25 billion that has been authorized, only $915 million in bonds have been issued to date.
Student Enrollment and State Funding
The District has had continued enrollment increases over the last three years. This year the district’s enrollment
increased 2.5%. The District serves more than 120,000 students; however, the District does not receive full
funding for this number of students. As a result, the District has educated more than 10,000 students without any
additional funding to support the costs. The District is seeking legislative changes to provide for additional
funding for enrollment and to strengthen efforts to modernize facilities and renew programs and services to
ensure access to students and community.
12
(Continued)
BASIC FINANCIAL STATEMENTS
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KPMG LLP
Suite 2000
355 South Grand Avenue
Los Angeles, CA 90071-1568
Independent Auditors’ Report
The Honorable Board of Trustees
Los Angeles Community College District
Los Angeles, California:
We have audited the basic financial statements of the Los Angeles Community College District (the
District) as of and for the year ended June 30, 2003, as listed in the table of contents. These financial
statements are the responsibility of the District’s management. Our responsibility is to express an opinion
on these financial statements based on our audit. The prior fiscal year summarized comparative
information has been derived from the District’s 2002 financial statements, and in our report dated
December 13, 2002, based on our audit, we expressed an unqualified opinion on those financial statements.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net
assets of the Los Angeles Community College District as of June 30, 2003 and the changes in its net assets
and its cash flows for the year then ended in conformity with accounting principles generally accepted in
the United States of America.
In accordance with Government Auditing Standards, we have also issued a report dated December 31,
2003 on our consideration of the District’s internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral
part of an audit performed in accordance with Government Auditing Standards and should be read in
conjunction with this report in considering the results of our audit.
Management’s discussion and analysis on pages 1 through 12 is not a required part of the basic financial
statements but is supplementary information required by accounting principles generally accepted in the
United States of America. We have applied certain limited procedures, which consisted principally of
inquiries of management regarding the methods of measurement and presentation of the required
supplementary information. However, we did not audit the information and express no opinion on it.
13
KPMG LLP, a U.S. limited liability partnership, is the U.S.
member firm of KPMG International, a Swiss cooperative.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a
whole. The accompanying supplemental financial information and other supplemental information is
presented for the purpose of additional analysis and is not a required part of the basic financial statements.
The accompanying schedule of expenditures of federal and state awards is presented for purposes of
additional analysis as required by the U.S. Office of Management and Budget Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial
statements. Such information and the supplemental financial information on pages 37 through 46 has been
subjected to the auditing procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a
whole. The supplemental information on pages 47 through 50 has not been subjected to the auditing
procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on
it.
December 31, 2003
14
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Statement of Net Assets
June 30, 2003
(With comparative summarized financial information for June 30, 2002)
Assets
2003
2002
60,513,833
468,153,671
23,672,988
2,815,000
464,368
60,569,332
6,872,846
38,134
51,414,624
514,772,749
42,698,103
2,052,936
389,945
57,944,841
8,487,231
232,723
623,100,172
677,993,152
38,789,833
—
—
3,713,524
39,149,353
48,993
2,815,000
4,032,359
Capital assets (note 6):
Land
Land improvements
Buildings
Construction in progress
Works of art
Machinery and equipment
Infrastructure
Accumulated depreciation
32,499,839
30,856,097
290,539,032
99,355,750
518,000
38,762,110
2,895,800
(166,130,269)
32,499,839
30,812,500
286,104,044
35,397,727
518,000
34,568,887
2,895,800
(153,234,394)
Capital assets, net
329,296,359
269,562,403
994,899,888
993,601,260
Current assets:
Cash and cash equivalents
Short-term investments (note 3)
Accounts receivable, net of allowance (note 4)
Notes receivable, current portion (note 4)
Student loans receivable, current portion (note 4)
Deposit with bond trustee
Inventory
Prepaid expenses and other assets
$
Total current assets
Noncurrent assets:
Restricted cash and cash equivalents
Long-term investments
Notes receivable, noncurrent portion
Student loans receivable, noncurrent portion (note 4)
Total assets
$
15
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Statement of Net Assets
June 30, 2003
(With comparative summarized financial information for June 30, 2002)
Liabilities and Net Assets
2003
2002
51,260,996
6,871,601
720,223
191,524
5,754,747
2,273,386
2,609,270
406,653
26,935,000
1,180,926
41,339,115
6,672,784
716,967
252,100
4,714,215
1,366,703
4,974,629
406,653
21,605,000
727,442
98,204,326
82,775,608
11,537,427
1,498,000
27,508,253
2,846,570
566,630,000
8,809,579
10,973,203
1,491,900
17,496,785
3,253,223
588,310,000
8,580,506
Total noncurrent liabilities
618,829,829
630,105,617
Total liabilities
717,034,155
712,881,225
225,070,619
220,240,967
5,537,867
9,680,572
11,843,238
18,095,519
7,637,918
4,945,907
2,882,371
26,968,285
15,963,714
9,718,791
277,865,733
280,720,035
994,899,888
993,601,260
Current liabilities:
Accounts payable
Deferred revenue
Compensated absences payable – current portion
General liability claims payable – current portion
Workers’ compensation claims payable – current portion
Other accrued liabilities
Amounts held in trust for others
Revenue bonds payable – current portion
Long-term debt – current portion
Capital leases – current portion
$
Total current liabilities
Noncurrent liabilities:
Compensated absences payable – noncurrent portion
General liability claims payable – noncurrent portion
Workers’ compensation claims payable – noncurrent portion
Revenue bonds payable – noncurrent portion
Long-term debt – noncurrent portion
Capital leases – noncurrent portion
Net assets:
Invested in capital assets, net of related debt
Restricted for:
Expendable:
Scholarships and loans
Capital projects
Debt service
Other special purposes
Unrestricted
Total net assets
Total liabilities and net assets
$
See accompanying notes to basic financial statements.
16
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Statement of Revenues, Expenses, and Changes in Net Assets
Year ended June 30, 2003
(With comparative summarized financial information for the year ended June 30, 2002)
2003
2002
45,046,210
(12,882,876)
43,274,172
(10,879,114)
32,163,334
32,395,058
88,021,756
31,357,123
11,905,549
30,628,208
77,935,099
37,273,046
38,184,123
32,381,699
194,075,970
218,169,025
327,070,110
96,956,596
185,546,720
6,176,107
12,895,875
329,944,145
69,882,112
185,214,974
5,896,749
10,968,462
628,645,408
601,906,442
(434,569,438)
(383,737,417)
250,047,306
118,266,341
1,574,420
790,539
24,189,157
(4,331,558)
36,517,413
(10,962,154)
250,234,337
106,208,590
1,414,540
5,300,224
25,960,225
(5,589,873)
25,273,195
(9,179,492)
Total nonoperating revenues
416,091,464
399,621,746
Income (loss) before other revenues
(18,477,974)
15,884,329
13,545,470
1,526,125
552,076
20,394,552
—
4,275,975
(2,854,303)
40,554,856
280,720,035
240,165,179
277,865,732
280,720,035
Operating revenues:
Tuition and fees
Less scholarship discounts and allowances
$
Net tuition and fees
Grants and contracts, noncapital:
Federal
State
Local
Auxiliary enterprise sales and charges
Total operating revenue
Operating expenses:
Salaries
Employee benefits
Supplies, materials, and other operating expenses and services
Utilities
Depreciation
Total operating expenses
Operating loss
Nonoperating revenues (expenses):
State apportionments, noncapital
Local property taxes
State taxes and other revenue
Investment income – noncapital
Investment income – capital
Interest expense on capital asset-related debt
Other nonoperating revenue
Other nonoperating expense
State apportionments, capital
Gifts and grants, noncapital
Local property taxes and revenues, capital
Changes in net assets
Net assets:
Beginning of year
End of year
$
See accompanying notes to basic financial statements.
17
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Statement of Cash Flows
Year ended June 30, 2003
(With comparative summarized financial information for the year ended June 30, 2002)
Cash flows from operating activities:
Tuition and fees
Grants and contracts
Payments to suppliers
Payments for utilities
Payments to employees
Payments for benefits
Depreciation
Bookstore and cafeteria sales
Sales and service of educational
Other payments
$
Net cash used in operating activities
Cash flows from noncapital financing activities:
State appropriations
Property taxes
Investment income – noncapital
Other receipts
Net cash provided by noncapital financing activities
Cash flows from capital financing activities:
Proceeds from capital debt
Capital appropriations
Purchases of capital assets
Principal paid on capital debt and leases
Interest paid on capital debt and leases
Deposit with trustee
Net cash used in capital financing activities
Cash flows from investing activities:
Interest on investments
Net cash provided by investing activities
See accompanying notes to basic financial statements.
18
37,232,978
160,778,950
(173,271,764)
(5,896,749)
(329,874,562)
(69,795,831)
(10,968,462)
32,235,319
304,977
(400,366)
(394,950,993)
(359,655,510)
249,856,442
119,106,576
1,574,420
24,482,925
250,234,337
108,420,855
5,300,224
10,907,363
395,020,363
374,862,779
45,968,789
15,623,670
(72,824,167)
(61,315,443)
(4,331,558)
60,569,332
27,785,000
24,670,526
(51,826,306)
(2,985,000)
(9,551,493)
(57,944,841)
(16,309,377)
(69,852,114)
24,979,696
25,960,225
25,960,225
(28,684,620)
90,563,977
119,248,597
99,303,666
90,563,977
$ (434,569,438)
—
(383,737,417)
93,911,701
12,895,875
10,968,462
21,322,463
(1,614,385)
243,582
9,921,881
198,817
(2,365,359)
2,624,491
(4,169,888)
560,968
(26,167,932)
(2,069,964)
667,724
5,813,499
(2,550,873)
2,109,341
(57,944,841)
(1,829,011)
1,173,801
$ (394,950,993)
(359,655,510)
$
Net cash used in operating activities
31,731,594
129,165,143
(170,523,620)
(6,176,107)
(321,319,011)
(84,780,998)
(12,895,875)
32,606,320
—
7,241,561
8,739,689
Cash and cash equivalents – beginning of year
Reconciliation of net operating loss to net cash used in operating activities:
Operating loss
Appraisal adjustments, net
Adjustments to reconcile operating loss to net cash provided by (used in)
operating activities:
Depreciation expense
Changes in assets and liabilities:
Receivables, net
Inventories
Other assets
Accounts payable
Deferred revenue
Deposits held for others
Deposit with bond trustee
Other liabilities
Compensated absences
2002
24,979,696
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – end of year
2003
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
(1)
Organization and Reporting Entity
The District is a political subdivision of the state of California and is located within the County of Los
Angeles. The District’s operations consist principally of providing educational services to the local
residents of the District. In conjunction with educational services, the District also provides supporting
student services such as the operation of campus bookstores and cafeterias. The District consists of nine
community colleges located within the County of Los Angeles.
For financial reporting purposes, the District includes all funds that are controlled by or dependent on the
District’s Board of Trustees. The District’s basic financial statements of the District include the financial
activities of the District and the combined totals of the trust and agency funds which primarily represent
Associated Student Organizations and various scholarships within the District. Associated Student
Organizations are recognized agencies of the Los Angeles Community College District and were organized
in accordance with provisions of the California Education Code to control the administration of student
funds. The financial affairs of the Associated Student Organizations are administered under the direction of
the College Financial Administrators at the respective colleges, with the supervision and guidance of the
District’s Senior Vice Chancellor of Operations.
(2)
Summary of Significant Accounting Policies
(a)
Basis of Presentation
The basic financial statements are reported using the economic resources measurement focus and the
accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a
liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as
revenues in the year for which they are levied. Grants and similar items are recognized as revenue as
soon as all eligibility requirements have been met.
(b)
Financial Reporting
The basic financial statements required by GASB Statements Nos. 34 and 35 include a statement of
net assets, a statement of revenues, expenses, and changes in net assets, and a statement of cash
flows. The District is considered a special-purpose government under the provisions of GASB
Statement No. 35. Accordingly, the District has chosen to present its basic financial statements using
the reporting model for special-purpose governments engaged only in business-type activities. This
model allows all financial information for the District to be reported in a single column. In
accordance with the business-type activities reporting model, the District prepares its statement of
cash flows using the direct method. The effect of internal activity between funds or groups of funds
has been eliminated from these basic financial statements. The District’s operating revenue includes
tuition, fees, and federal and state revenues. Operating costs include cost of services as well as
materials, contracts, personnel, and depreciation.
19
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
(c)
Cash and Cash Equivalents
The District participates in the common investment pool of the County of Los Angeles, California,
which is stated at cost, which approximates market value. For purposes of the statement of cash
flows, the District considers all cash and investments pooled with the County plus any other cash
deposits or investments with initial maturities of three months or less to be cash and cash
equivalents.
(d)
Inventory
Bookstore, cafeteria, and supply inventories are recorded at cost on the first-in, first-out basis and
expended on the consumption method.
(e)
Properties and Depreciation
Properties are carried at cost or at appraised fair market value at the date received in the case of
properties acquired by donation and by termination of leases for tenant improvements, less
allowance for accumulated depreciation. Depreciation is computed by use of the straight-line method
over the estimated useful lives of the assets.
Current ranges of useful lives for depreciable assets are as follows:
Land improvements
Buildings
Building improvements
Equipment
Vehicles
Infrastructure
Leasehold improvements
15 years
50 years
20 years
3 to 7 years
5 years
15 years
7 years
The District’s capitalization threshold is as follows:
Movable equipment
Land, building, and infrastructure
(f)
$ 5,000 and above
50,000 and above
Accrued Employee Benefits
It is the policy of the District to recognize as an expense the costs associated with employee vacation
benefits as they are paid. The District has accounted for vacation leave benefits which have been
earned but not taken as a liability within the statement of net assets since it is believed that this
liability will not be liquidated with current available resources.
Accumulated sick leave benefits are not recognized as liabilities of the District. The District’s policy
is to record sick leave as an operating expense in the period taken since such benefits do not vest nor
is payment probable.
20
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
(g)
Deferred Revenue
A majority of the deferred revenue balance represents cash collected in advance for tuition and
student fees and will be recognized as revenue in the period in which it is earned. Deferred revenue
also includes an amount relating to the District’s office lease expense computed under the
straight-line method.
(h)
Capitalized Interest
It is the District’s policy to offset interest income against interest costs for construction projects
financed with tax-exempt borrowings.
(i)
Prior Year Information
The basic financial statements and required supplementary information include partial or
summarized prior-year comparative information. Such information does not include all of the
information required or sufficient detail to constitute a presentation in conformity with accounting
principles generally accepted in the United States of America. Accordingly, such information should
be read in conjunction with the District’s basic financial statements for the year ended June 30, 2002,
from which such partial and summarized information was derived.
(j)
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, revenues, and expenses in the accompanying basic
financial statements. Actual results could differ from those estimates.
(3)
Cash and Investments
Cash and investments at June 30, 2003 and 2002 consist of the following:
Cash in County Treasury
Cash in banks
$
Total cash
Investments
Total cash and investments
$
2003
2002
80,056,184
19,247,482
78,842,352
12,721,625
99,303,666
91,563,977
468,153,671
514,821,742
567,457,337
606,385,719
As provided for by the State of California Education Code, a significant portion of the District’s cash
balances is deposited with the County Treasurer for the purpose of increasing interest earnings through
county investment activities. Each respective fund’s share of the total pooled cash is included in the
accompanying combined balance sheet under the caption Cash in County Treasury. Interest earned on such
pooled cash balances is distributed to the participating funds based upon each fund’s average cash balance
during the distribution period. The California Government Code requires California banks and savings and
loan associations to collateralize the District’s deposits by pledging government securities as collateral. All
21
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
deposits with financial institutions must be collateralized in an amount equal to 110% of uninsured
deposits. At no time during the year did the value of the collateralized property fall below 110% of
uninsured deposits.
Under provisions of the District’s investment policy, and in accordance with Sections 53601 and 53602 of
the California Government Code, the District may invest in the following types of investments:
•
Securities of the U.S. Government or Its Agencies
•
Small Business Administration Loans
•
Negotiable Certificates of Deposit
•
Bankers’ Acceptances
•
Commercial Paper
•
Local Agency Investment Fund (State Pool) Deposits
•
Passbook Savings Account Demand Deposits
•
Repurchase Agreements.
At June 30, 2003, the District had cash in banks with a carrying value and bank balance of $19,247,481
and $36,769,196, respectively. Of the bank balance, $345,440 was covered by federal depository
insurance, of which $36,423,756 was collateralized with securities held by the pledging financial
institution’s trust department, but not in the District’s name. At June 30, 2002, the District had cash in
banks with a carrying value and bank balance of $12,721,625 and $22,496,783, respectively. Of the bank
balance, $248,638 was covered by federal depository insurance, of which $22,248,145 was collateralized
with securities held by the pledging financial institution’s trust department, but not in the District’s name.
The difference between the carrying value and the bank balance represents items in transit in the normal
course of business and cash on hand.
The District accounts for investments held in accordance with GASB Statement No. 31, Accounting and
Financial Reporting for Certain Investments and for External Investment Pools, which establishes fair
value standards for investments held by governmental entities.
At June 30, 2003 and 2002, the District’s investments consist primarily of U.S. government securities and
corporate notes and bonds which are carried at fair value, based on quoted market values.
Specifically identifiable investments are classified as to credit risk by three categories and summarized
below as follows: Category 1 includes investments that are insured or registered or for which securities are
held by the District or its agent in the District’s name and deposits insured or collateralized with securities
held by the District; Category 2 includes uninsured and unregistered investments for which the securities
are held by the counterparty’s trust department or agent in the District’s name and deposits collateralized
with securities held by the pledging financial institution’s trust department or agent in the District’s name;
Category 3 includes uninsured and unregistered investments for which the securities are held by the
counterparty or by its trust department or agent, but not in the District’s name.
22
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
All certificates of deposit are collateralized as required by California state law for any amount exceeding
FDIC or FSLIC coverage. Collateral is held in trust by the institutions and monitored by the State
Superintendent of Banking.
June 30, 2003
1
Categorized – investments:
Marketable equity securities
2
Fair market
value
3
$
—
321,779
—
321,779
$
—
321,779
—
321,779
Noncategorized investments:
Master repurchase agreement
Certificates of deposit
464,793,752
3,038,140
Total investments
$ 468,153,671
Cash in County Treasury
$
80,056,184
June 30, 2002
1
Categorized – investments:
Marketable equity securities
2
Fair market
value
3
$
—
138,047
—
138,047
$
—
138,047
—
138,047
Noncategorized investments:
Master repurchase agreement
Certificates of deposit
Investment in real estate
Other
512,295,000
2,239,549
48,993
100,153
Total investments
$ 514,821,742
Cash in County Treasury
$
78,842,352
The District’s noncategorized investments earned an interest rate of 4.53%.
23
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
(4)
Accounts, Notes and Other Receivables
Accounts receivable at June 30, 2003 and 2002 are summarized as follows:
Tax delinquencies
Federal and state programs
State lottery
Interest receivable
Notes receivable
Accounts receivable – principal apportionment
Accounts receivable – campus students
Accounts receivable – credit memos
Accounts receivable – NSDL/nursing loans
Other
Less allowance for doubtful accounts
Accounts receivable, net
2003
2002
$
14,074,480
17,819,060
2,508,817
351,687
2,815,000
—
1,422,038
1,448,335
3,713,524
9,022,028
(22,509,089)
14,914,715
19,671,587
2,225,176
1,214,256
4,867,936
9,526,449
1,070,053
3,621,190
4,138,548
8,344,453
(17,323,370)
$
30,665,880
52,270,993
The allowance for doubtful accounts is maintained at an amount sufficient to fully reserve tax
delinquencies as well as the possible uncollectibility of other receivable balances.
Tax delinquencies represent prior and current year unpaid/unreceived property taxes which were assessed
and billed by Los Angeles County during the 2002/2003 year and prior. The District receives tax revenues
from the County biannually in December and April. Any amounts which remain unpaid/unreceived by the
District within 60 days of fiscal year-end are considered delinquent. The Los Angeles County board of
supervisors is the taxing authority which levies and collects tax revenues.
24
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
(5)
Accounts Payable
Accounts payable at June 30, 2003 and 2002 are summarized as follows:
L.A. Sheriff’s Department
Utilities
Principal apportionment
Payroll accrual
Interest payable
Grants
Medicare accrual
Election expense payable
Financial aid payable
Plumbing, piping, and roding
Capital outlay projects
Program management – DMJM/JGM
Claims payable
Board of Equalization
Vendors payable
Total
25
2003
2002
$
1,868,018
—
3,402,912
9,122,649
2,591,686
5,537,420
—
1,748,425
1,890,301
—
4,359,638
6,558,988
287,222
—
13,893,737
2,664,571
807,021
—
9,107,739
3,126,612
4,644,421
659,055
—
2,706,669
1,637,471
—
3,775,000
700,000
559,808
10,950,748
$
51,260,996
41,339,115
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
(6)
Capital Assets
A summary of changes in capital assets follows (in thousands):
Balance at
July 1, 2002
Capital assets not being depreciated:
Land
Construction in process
Works of art
$
Total capital assets, not
being depreciated
Capital assets being depreciated:
Land improvements
Buildings
Equipment
Infrastructure
Total capital assets being
depreciated
Less accumulated depreciation
Total capital assets being
depreciated, net
Total
$
Additions
Disposals
Balance at
June 30, 2003
32,499,839
35,397,727
518,000
—
63,958,023
—
—
—
—
32,499,839
99,355,750
518,000
68,415,566
63,958,023
—
132,373,589
30,812,500
286,104,044
34,568,887
2,895,800
43,597
4,434,988
4,193,223
—
—
—
—
—
30,856,097
290,539,032
38,762,110
2,895,800
354,381,231
8,671,808
—
363,053,039
(153,234,394)
(12,895,875)
—
(166,130,269)
201,146,837
(4,224,067)
—
196,922,770
269,562,403
59,733,956
—
329,296,359
26
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
Balance at
July 1, 2001
Capital assets not being depreciated:
Land
Construction in process
Works of art
$
Total capital assets, not
being depreciated
Capital assets being depreciated:
Land improvements
Buildings
Equipment
Infrastructure
Total capital assets being
depreciated
Less accumulated depreciation
Total capital assets being
depreciated, net
Total
(7)
$
Additions
Disposals
Balance at
June 30, 2002
18,651,839
7,901,159
436,000
13,848,000
27,496,568
82,000
—
—
—
32,499,839
35,397,727
518,000
26,988,998
41,426,568
—
68,415,566
30,812,500
277,821,241
32,076,960
2,895,800
—
8,282,803
2,512,338
—
—
—
(20,411)
—
30,812,500
286,104,044
34,568,887
2,895,800
343,606,501
10,795,141
(20,411)
354,381,231
(142,265,932)
(10,968,462)
—
(153,234,394)
201,340,569
(173,321)
(20,411)
201,146,837
228,329,567
41,253,247
(20,411)
269,562,403
Lease Commitments
The District leases various assets, as lessee, under operating lease agreements. Lease payments under
operating leases (including month-to-month leases) approximating $5,599,795 have been charged as
expenses in the accompanying combined statement of revenues, expenditures, and changes in net assets.
At June 30, 2003, minimum lease commitments under long-term lease contracts, including the District’s
central office lease, were as follows:
Year ending June 30:
2004
2005
2006
2007
2008
2009-2013
2014-2018
Total
27
$
4,231,346
3,845,662
3,711,200
3,713,876
3,521,955
13,701,622
949,296
$
33,674,957
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
(8)
Employee Retirement Systems
Qualified employees are covered under multiple-employer defined benefit pension plans maintained by
agencies of the state of California. Certificated employees are members of the State Teachers’ Retirement
System, and classified employees are members of the Public Employees’ Retirement System. In addition,
employees not participating in the State Teachers’ Retirement System or the Public Employees’ Retirement
System may participate in the Public Agency Retirement System, which is a defined contribution plan.
(a)
Plan Descriptions and Provisions
State Teachers’ Retirement System (STRS) – All full-time certificated employees participate in the
STRS, a cost-sharing multiple-employer contributory public employee retirement system defined
benefit pension plan. An actuarial valuation by employer is not available. The plan provides
retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan
members and beneficiaries.
Employees attaining the age of 60 with five years of credited California service (service) are eligible
for normal retirement and are entitled to a monthly benefit of 2% of their final compensation for each
year of service. Final compensation is defined as the highest average salary earned during three
consecutive years of service. The plan permits early retirement options at age 55 or as early as age 50
with 30 years of service. Disability benefits of up to 90% of final compensation are available to
members with five years of service. A family benefit is available if the deceased member had at least
one year of service and was an active member or on disability leave. After five years of credited
service, members become 100% vested in retirement benefits earned to date. If a member’s
employment is terminated, the accumulated member contributions are refundable.
Benefit provisions for STRS are established by the State Teachers’ Retirement Law (Part 13 of the
California Education Code, Sec. 22000 et seq.). STRS issues a separate comprehensive annual
financial report that includes financial statements and required supplementary information. Copies of
the annual financial report may be obtained from the STRS Executive Office.
California Public Employees’ Retirement System (PERS) – All full-time classified employees
participate in the PERS, an agent multiple-employer contributory public employee retirement system
defined benefit pension plan that acts as a common investment and administrative agent for
participating public entities within the state of California. The Los Angeles Community College
District is part of a cost-sharing pool within PERS. An actuarial valuation by employer is not
available. One actuarial valuation is performed for those employers participating in the pool, and the
same contribution rate applies to each.
Employees are eligible for retirement at the age of 50 and are entitled to a monthly benefit of 1.1%
of final compensation for each year of service credit. The rate is increased if retirement is deferred
beyond the age of 50, up to age 63. Retirement compensation is reduced if the plan is coordinated
with Social Security.
The plan also provides death and disability benefits. Retirement benefits fully vest after five years of
credited service. Upon separation from the Fund, members’ accumulated contributions are
refundable with interest through the date of separation.
28
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
Benefit provisions for PERS are established by the Public Employees’ Retirement Law (Part 3 of the
California Government Code, Sec. 20000 et seq.). PERS issues a separate comprehensive annual
financial report that includes financial statements and required supplementary information. Copies of
the annual financial report may be obtained from the PERS Executive Office.
(b)
Contributions Required and Contributions Made
For fiscal 2003, the District is required by statute to contribute 8.25%, 2.771%, and 0% of gross
salary expenditures to STRS, PERS (pooled), and PERS (security), respectively. Participants are
required to contribute 8% and 7% of gross salary to STRS and PERS, respectively.
The District’s contributions for the years ended June 30, 2003, 2002, and 2001 are as follows:
STRS
2003
2002
2001
$
14,019,805
11,435,718
10,191,800
contributions
100%
100
100
The District’s contribution represented 0.61% of the total contributions required of all participating
employers in STRS. The District’s employer contributions to STRS and PERS met the required
contribution rate established by law.
(c)
Postretirement Benefits
The District provides postretirement health benefits to its retirees who meet plan eligibility
requirements. Substantially all retirees of the District may become eligible for those benefits if they
reach the appropriate eligibility requirements for retirement while working for the District. The
retirement eligibility for PERS’ retirees is a minimum age of 50 and minimum years of service of
five. The retirement eligibility for STRS retirees is a minimum age of 55 and minimum years of
service of five or a minimum age of 50 with 30 years of service. In addition, the District also has
minimum continuous service requirements for retirement that range from 7 years to 20 years, which
vary by employee class. The District’s expenditures for postretirement health benefits are recognized
when incurred. During the fiscal years ended June 30, 2003 and 2002, expenditures of $16,667,587
and $14,256,708, respectively, were recognized for postretirement health benefits.
(d)
Public Agency Retirement System (PARS)
The Omnibus Budget Reconciliation Act of 1990 (Section 11332) extends the Social Security tax to
state and local government employees not participating in a qualified public retirement system.
Internal Revenue Code 3121 (b)(7)(F) proposed regulations allows employers to establish an
alternative retirement system in lieu of Social Security taxes. Such an alternative system was
authorized on June 26, 1991 to be established by the end of calendar year 1991 for certain employees
not participating in STRS or PERS.
29
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
On December 4, 1991, the District’s board of trustees adopted PARS, a defined contribution plan
qualifying under Sections 401 (a) and 501 of the Internal Revenue Code, effective January 1, 1992,
for the benefit of employees not participating in STRS or PERS who were employed on that date or
hired thereafter. The District has contracted with the Phase 11 Insurance Services, in which Imperial
Trust Company serves as the trustee, to manage the assets of the PARS plan.
Total contributions to PARS are 7.50%. The employer contribution is 4.00% and the employee
contribution is 3.50%. Contributions are vested 100% for employees. Employees can receive benefits
when they retire at age 60, become disabled, terminate employment, or die.
(e)
Contributions Required and Contributions Made
The District contribution information for the years ended June 30, 2003 and 2002 is as follows:
Total employee
contributions
2003:
PARS
$
2002:
PARS
(9)
Total employer
contributions
1,064,387
1,392,368
1,514,895
1,923,942
Commitments and Contingencies
The District receives a substantial portion of its total revenues under various governmental grants, all of
which pay the District based on reimbursable costs as defined by each grant. Reimbursement recorded
under these grants is subject to audit by the grantors. Management believes that no material adjustments
will result from the subsequent audit of costs reflected in the accompanying basic financial statements.
The District is a defendant in various lawsuits at June 30, 2003. Although the outcome of these lawsuits is
not presently determinable, in the opinion of management, based in part on the advice of counsel, the
resolution of these matters will not have a material adverse effect on the financial condition of the District
or is adequately covered by insurance.
The District has entered into various contracts for the construction of facilities throughout the campuses.
At June 30, 2003 and 2002, the total value of these contracts to be paid over the course of two years
approximated $30,900,000 and $27,720,000, respectively.
30
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
(10) Long-Term Liabilities
The following is a summary of long-term liabilities of the District for the years ended June 30, 2003 and
2002:
Balance at
July 1, 2002
Refunding certificates of
participation
General Obligation Bonds, 2001
Series A
Revenue bonds
Workers’ compensation claims
payable
General liability
Vacation benefits payable
Lease purchase financing
Total
Refunding certificates of
participation
General Obligation Bonds, 2001
Series A
Revenue bonds
Workers’ compensation claims
payable
General liability
Vacation benefits payable
Lease purchase financing
Other liabilities
Total
(a)
$
$
$
$
Additions
Deletions
Balance at
June 30, 2003
Due within
one year
84,915,000
43,650,000
(42,030,000)
86,535,000
3,835,000
525,000,000
3,659,876
—
—
(17,970,000)
(406,653)
507,030,000
3,253,223
23,100,000
406,653
22,211,000
1,744,000
11,079,542
8,580,506
16,806,747
136,524
1,898,331
2,318,789
(5,754,747)
(191,524)
(720,223)
(908,790)
33,263,000
1,689,000
12,257,650
9,990,505
5,754,747
191,524
720,223
1,180,926
657,189,924
64,810,391
(67,981,937)
654,018,378
35,189,073
Balance at
July 1, 2001
Additions
Deletions
Balance at
June 30, 2002
60,115,000
27,785,000
(2,985,000)
84,915,000
3,635,000
525,000,000
4,066,529
—
—
—
(406,653)
525,000,000
3,659,876
17,970,000
406,653
14,261,000
—
10,516,369
8,213,639
435,723
12,664,215
1,996,100
1,280,140
1,247,163
—
(4,714,215)
(252,100)
(716,967)
(880,296)
(435,723)
22,211,000
1,744,000
11,079,542
8,580,506
—
4,714,215
252,100
716,967
727,442
—
622,608,260
44,972,618
(10,390,954)
657,189,924
28,422,377
Due within
one year
Refunding Certificates of Participation
On October 1, 1999, the District issued 1999 energy Retrofit Project Certificates of Participation
(COP) in the amount of $7,450,000 (with an average interest rate of 4.50% at June 30, 2001)
evidencing fractional undivided interests of the registered owners thereof in rental payments to be
made by the District, pursuant to a Master State and Municipal Lease Purchase Agreement, dated
October 1, 1999, between Viron Corporation, as lessor, and the District, as lessee, for use and
possession of certain energy retrofit equipment to be installed by the District at Los Angeles City
College. Pursuant to the lease agreement, the District will lease the equipment from Viron
Corporation for a term of 15 years. The District is required under the lease to pay rental payments for
the use and possession of the equipment and to pay the cost of maintenance and repair of the
equipment.
31
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
On May 6, 1993, the District issued 1993 Series A Refunding Certificates of Participation (RCOP) in
the amount of $14,160,000 with an average interest rate of 4.75%, to advance refund $16,850,000,
$12,610,000, and $28,860,000 of outstanding 1989 Series A Certificates of Participation (COP),
1989 Series B COPs, and 1990 Series A COPs with an average interest rate of 7.33%, 7.036%, and
6.287%, respectively. The refunded COPs were previously issued to finance the acquisition of a new
Educational Service Center (ESC), the construction of Phase I of the new campus at Mission
College, five construction projects at East L.A. College, Southwest College, and West L.A. College
plus the acquisition of mainframe and peripheral computer equipment.
The net proceeds of the advance refundings totaling $64,865,000 (after payment of $3,745,362 in
underwriting fees, insurance, and other issuance costs) were used to purchase U.S. Treasury
securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for
all future debt service requirements on the refunded COPs. As a result, the refunded COPs are
considered to be defeased in substance, and therefore, the related debt, as well as the trust assets,
have been removed from the District’s financial statements.
The advance refundings were undertaken in order to achieve debt service savings by utilizing current
lower interest rates. In addition, the advance refunding of the 1989 Series A and 1990 Series A COPs
delayed principal payments from August 15, 1992 until August 15, 1998 and extends the maturity
date to the year 2020.
The 1989 Series B and the 1989 Series A COPs were fully redeemed on August 15, 1997 and
August 15, 1999, respectively, and have no interest or principal outstanding as of June 30, 2001. The
1990 Series A COP was fully redeemed on August 15, 2000 and has no interest or principal
outstanding as of June 30, 2001.
U.S. Bank was designated as trustee of the RCOPs and assigned the rights to enforce amounts
payable by the District under the certificate agreement. All funds held under the trust agreement are
invested at the specific instruction of the District.
On July 26, 2001, the District issued 2001 Series A Certificates of Participation (COP) in the amount
of $27,785,000 with an average interest rate of 4.00%. This COP was issued to finance the purchase
of the Van de Kamp Property (Property) and construction of a satellite campus on the property for
City College.
On July 1, 2002 and August 1, 2002, the District issued 2002 Series A Refunding Certificates of
Participation (RCOP) in the amount of $43,650,000 with an average interest rate of 10% to partially
refund the 1992 Series A Certificates of Participation in the amount of $54,830,000, of which
$38,095,000 was refunded. The $6,475,000 of the $10,515,000, that was not eligible for refunding
remaining outstanding for the 1992 COPS. The refunded RCOPs were previously issued to advance
refund $16,850,000, $12,610,000, and $28,860,000 of outstanding 1989 Series A Certificates of
Participation (COP), 1989 Series B COPs, and 1990 Series A COPs with an average interest rate of
7.33%, 7.036%, and 6.287%, respectively. The refunded COPs were previously issued to finance the
acquisition of a new Educational Service Center (ESC), the construction of Phase I of the new
campus at Mission College, five construction projects at East L.A. College, Southwest College, and
West L.A. College plus the acquisition of mainframe and peripheral computer equipment.
32
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
Debt service requirements to maturity of the RCOPs at June 30, 2003 are as follows:
Year
ending
June 30
2004
2005
2006
2007
2008
2009 – 2013
2014 – 2018
2019 – 2023
2024 – 2028
2029 – 2033
Total
(b)
1993 Series A
Principal
Interest
1999 Series A
Principal
Interest
2001 Series A
Principal
Interest
2002 Series A
Principal
Interest
$
1,405,000
1,500,000
1,600,000
—
—
—
—
—
—
—
200,529
124,975
42,800
—
—
—
—
—
—
—
360,000
375,000
395,000
410,000
—
2,370,000
2,475,000
—
—
—
313,845
297,308
279,785
261,065
—
976,834
244,519
—
—
—
500,000
515,000
530,000
550,000
—
3,040,000
3,735,000
4,725,000
6,030,000
7,685,000
1,268,236
1,253,011
1,237,336
1,220,449
—
5,781,951
5,067,088
4,042,375
2,704,500
998,125
1,570,000
2,010,000
2,105,000
2,550,000
2,300,000
13,100,000
16,250,000
8,450,000
—
—
1,713,650
1,695,005
1,685,867
1,666,603
1,544,505
6,261,182
3,348,396
353,590
—
—
$
4,505,000
368,304
6,385,000
2,373,356
27,310,000
23,573,071
48,335,000
18,268,798
General Obligation Bonds
On April 10, 2001, the voters of the County of Los Angeles passed Proposition A, which included a
$1.2 billion General Obligation Bond measure.
On June 7, 2001, the District issued the 2001 Series A General Obligation Bonds in the amount of
$525,000,000 with an average interest rate of 4.63% maturing in 2026. The proceeds of this first
series of general obligation bonds are to be used to finance the construction, equipping, and
improvement of college and support facilities at nine colleges.
Debt service requirements to maturity of the general obligation bonds at June 30, 2003 are as
follows:
Year ending June 30:
2004
2005
2006
2007
2008
2009 – 2013
2014 – 2018
2019 – 2023
2024 – 2026
Total
Principal
2001 Series A
Interest
Total
$
23,100,000
10,000,000
3,655,000
4,630,000
5,670,000
46,620,000
88,155,000
148,575,000
176,625,000
25,199,831
24,537,831
24,269,300
24,113,956
23,920,831
114,736,858
97,673,213
65,671,551
18,294,875
48,299,831
34,537,831
27,924,300
28,743,956
29,590,831
161,356,858
185,828,213
214,246,551
194,919,875
$
507,030,000
418,418,246
925,448,246
33
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
(c)
Revenue Bonds
On March 1, 1995, the District entered into the contract with the State of California, State Public
Works Board, for participation in the sale of Energy and Water Efficiency Revenue Bonds Phase IV,
Series 1995A, for funding of energy conservation design and construction projects at Los Angeles
Pierce College in the amount of $4,063,000. Until the termination date on October 1, 2010, the
amount of $285,000 will be withheld from the District’s apportionment payments in order to satisfy
the District’s annual energy service contract obligation due on August 15 each year. At June 30,
2003 and 2002, $2,280,000 and $2,565,000 were outstanding, respectively.
On June 1, 1996, the District entered into the contract with the State of California, State Public
Works Board, for participation in the sale of Energy and Water Efficiency Revenue Bonds Phase V,
Series 1996 A, for funding of energy conservation design and construction projects at Los Angeles
Southwest College in the amount of $1,581,488. Until the termination date on August 1, 2010, the
amount of $121,653 will be withheld from the District’s apportionment payments in order to satisfy
the District’s annual energy service contract obligation due on August 15 each year. At June 30,
2003 and 2002, the outstanding balance was $973,223 and $1,094,876, respectively.
Debt service requirements to maturity of the revenue bonds at June 30, 2003 are as follows:
Principal
Year ending June 30:
2004
2005
2006
2007
2008
2009 – 2012
Total
Revenue Bonds
Interest
Total
$
406,653
406,653
406,653
406,653
406,653
1,219,958
—
—
—
—
—
—
406,653
406,653
406,653
406,653
406,653
1,219,958
$
3,253,223
—
3,253,223
34
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
(d)
Lease Purchase Financing
Debt service requirements to maturity of the lease purchase financing transactions at June 30, 2003
are as follows:
Principal
Year ending June 30:
2004
2005
2006
2007
2008
2009 – 2013
2014-2018
Total
Interest
Total
$
1,180,926
1,161,320
1,098,822
1,101,498
909,577
3,834,407
703,957
541,964
474,225
406,919
340,803
300,376
656,667
120,557
1,722,890
1,635,545
1,505,741
1,442,301
1,209,953
4,491,074
824,514
$
9,990,507
2,841,511
12,832,018
(11) Risk Management
The District is exposed to various risks of losses related to torts; theft of, damage to, and destruction of
assets; errors and omissions; injuries to employees; and natural disasters. The District is self-insured for up
to a maximum of $500,000 for each workers’ compensation claim, $250,000 per employment practices
claims, $100,000 for each general liability claim up to an amount aggregate of $300,000; thereafter,
self-insured decreases to $10,000 per each claim up to $25,000,000 per claim. The District currently
reports all of its risk management activities in the statement of net assets. The balance of all outstanding
workers’ compensation and incurred general liability claims is estimated based on information provided by
an outside actuarial study performed in 2002. The amount of the outstanding liability at June 30, 2003 and
2002 includes estimates of future claim payments for known cases as well as provisions for incurred but
not reported claims and adverse development on known cases which occurred through that date.
Because actual claim liabilities depend on such complex factors as inflation, changes in legal doctrines,
and damage awards, the process used in computing claims liability does not necessarily result in an exact
amount. Liabilities for incurred losses to be settled by fixed or reasonably determinable payments over a
long period of time are reported at their present value using expected future investment yield assumption at
1.5%.
Changes in the balances of workers’ compensation and general liability claims during fiscal years ended
June 30, 2003 and 2002 were as follows:
Workers’ compensation
General liability
$
Balance at
July 1, 2002
Current year
claims and
changes in
estimates
22,211,000
1,744,000
16,806,747
136,524
35
Claim
payments
(5,754,747)
(191,524)
Balance at
June 30, 2003
33,263,000
1,689,000
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Basic Financial Statements
June 30, 2003
Workers’ compensation
General liability
$
Balance at
July 1, 2001
Current year
claims and
changes in
estimates
14,261,000
—
12,664,215
1,996,100
Claim
payments
(4,714,215)
(252,100)
Balance at
June 30, 2002
22,211,000
1,744,000
During the years ended June 30, 2003 and 2002, the District made total premium payments of
approximately $1,108,841 and $665,074, respectively, relating to both general liability and property
claims.
(12) Subsequent Events
On July 1, 2003, the District issued 32,130,000 of 2003-2004 Tax Revenue Anticipation Notes (TRANS)
maturing on July 25, 2004 at an interest rate of 2.0%. The notes are to be repaid from unrestricted monies
such as taxes, income, revenues, cash receipts, and other monies intended as receipts for the General Fund
of the District. The purpose of the issue was to provide funds to pay budgeted expenses, including current
operating and other expenses and obligations of the District, prior to the receipt of certain anticipated taxes
and other revenues received during the District’s 2003-2004 fiscal year. The principal amount of the note,
together with the interest, is payable in equal amounts during January and April 2004.
On July 29, 2003, the District issued $189,685,000 Series A, B, and C- General Obligation Bonds with
various interest rates ranging from 2% to 5%, for Proposition AA, $980,000,000, which was passed by
voters on May 20, 2003. The Bond measure was designed to finance and refinance construction, building
acquisition, equipment, and improvement of college and support facilities at the various campuses of the
District and refinance other outstanding debts of the District and colleges. The District is in a major capital
construction program that will continue for the next several years.
On August 12, 2003, the District made a prepayment on certain Certificates of Participation totaling
$31,893,479 as follows: 1999 Energy Retrofit Project $1,607,101, 2001 Series A $25,710,210, and 2002
Series A of $4,576,168.
On September 2, 2003, the District offered to its employees the 457(b) Deferred Compensation Plan and to
every part-time faculty member who is not a mandatory CalSTRS Defined Benefit Program member the
option of participating in one of the following three retirement plans:
(a)
The CalSTRS Cash Balance Benefit Program with the employee contributing 3.75% of his or her
creditable earnings and the District contributing 4.25% of the employee’s creditable earnings
(b)
The CalSTRS Defined Benefit Program with the employee contributing 8% of his or her creditable
earnings and the District contributing 8.25% of the employee’s creditable earnings
(c)
The Public Agency Retirement System (PARS) with the employee contributing 3.5% of his or her
creditable earnings and the District contributing 4% of the employee’s creditable earnings.
36
SUPPLEMENTAL FINANCIAL INFORMATION
THIS PAGE LEFT INTENTIONALLY BLANK
LOS ANGELES COMMUNITY COLLEGE DISTRICT
General Fund
Balance Sheet
June 30, 2003
Assets
Cash in County Treasury
Cash in banks
Cash in revolving fund
Investments
Accounts, notes, interest, and loans receivable, net
Due from other funds
Prepaid expenses and other assets
Total assets
$
35,573,817
7,457,889
164,012
321,779
13,776,298
11,519,186
36,610
$
68,849,591
$
31,665,963
2,993,079
441,378
10,007,833
1,689,524
1,900,000
Liabilities and Fund Equity
Liabilities:
Accounts payable
Due to other funds
Amounts held in trusts
Deferred revenue
General liability claims payable
Workers’ compensation claims payable
Total liabilities
48,697,777
Fund equity:
Restricted
Unrestricted
12,514,194
7,637,620
0
20,151,814
Total fund equity
Total liabilities and fund equity
$
See accompanying independent auditors’ report.
37
68,849,591
LOS ANGELES COMMUNITY COLLEGE DISTRICT
General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balances
Year ended June 30, 2003
Revenues:
Federal revenues:
Higher Education Acts
Job Training Partnership Act
Temporary Assistance for Needy Families (TANF)
Vocational Education Act
Veterans Education
College Work-Study
Seog
Pell (Beog)
Other
$
Total federal revenues
8,356,447
2,677,392
477,850
5,899,395
6,250
2,422,353
107,167
68,980
542,239
20,558,073
State revenues:
State apportionments
Tax relief subvention
State lottery
Extended opportunity program
Disabled Students Programs and Services
CA Works Oppor. & Responsibility to Kids
Matriculation program
Instructional Equipment/Modem Technology
Telecommunication and Technology
Other
236,109,421
1,574,420
13,937,885
5,745,969
5,031,505
5,698,005
4,684,457
—
1,111,150
84,385
Total state revenues
273,977,197
Local revenues:
Local property taxes
Interest
Enrollment fees
Tuition and fees, net of scholarship discounts and allowance
Community service fees
Parking fees
Health service fees
Student fees and charges
Other
118,818,417
466,224
9,526,409
11,579,660
6,092,572
2,490,684
1,598,103
741,502
12,873,026
Total local revenues
164,186,597
Total revenues
458,721,867
Expenditures:
Current:
Academic salaries
Classified salaries
Employee benefits
Books and supplies
Contract services, student grants, and other operating expenditures
Capital outlay and equipment replacement
197,174,843
118,019,127
82,453,592
9,932,480
56,555,847
9,707,726
Total expenditures
473,843,615
Deficit of revenues on expenditures
(15,121,748)
Other financing uses:
Operating transfers out
(11,085,067)
Net decrease in fund balances
(26,206,815)
Fund balances at July 1, 2002
46,358,629
Fund balances at June 30, 2003
$
See accompanying independent auditors’ report.
38
20,151,814
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Special Revenue Funds
Combined Balance Sheet
June 30, 2003
Special
Reserve
Fund
Assets
Cash in County Treasury
Cash in banks
Cash in Revolving Fund
Accounts, notes, interest, and loans receivable,
net of allowance for doubtful accounts
Due from other funds
Prepaid expenses
Inventory
Total assets
$
Child
Development
Fund
Bookstore
Fund
Cafeteria
Fund
Total
16,420,768
—
—
2,219,615
128,413
—
—
527,673
129,415
—
(24,929)
7,884
18,640,383
631,157
137,299
8,696,159
193,979
—
—
1,277,445
439,207
—
—
898,206
440,545
1,525
6,792,038
42,020
481,211
—
80,807
10,913,830
1,554,942
1,525
6,872,845
$
25,310,906
4,064,680
8,789,402
586,993
38,751,981
$
3,312,285
604,284
—
794,663
3,016,709
—
486,675
2,768,923
141,702
250,187
400,889
—
4,843,810
6,790,805
141,702
3,916,569
3,811,372
3,397,300
651,076
11,776,317
21,394,337
—
—
—
253,308
—
—
4,547,044
845,058
—
(64,083)
—
21,394,337
4,736,269
845,058
21,394,337
253,308
5,392,102
(64,083)
26,975,664
25,310,906
4,064,680
8,789,402
586,993
38,751,981
Liabilities and Fund Equity
Liabilities:
Accounts payable
Due to other funds
Deferred revenue
Total liabilities
Fund equity:
Capital projects
Unrestricted
Reserve for program and capital expenditures
Total fund equity
Total liabilities and fund equity
$
See accompanying independent auditors’ report.
39
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Special Revenue Funds
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
Year ended June 30, 2003
Special
Reserve
Fund
Revenues:
Federal revenues:
Tuition and fees
Other
$
Child
Development
Fund
Bookstore
Fund
Cafeteria
Fund
Total
—
1,796,197
134,404
—
—
—
—
204,747
134,404
2,000,944
1,796,197
134,404
—
204,747
2,135,348
State revenues:
Child development program
Other
—
13,545,470
6,128,116
—
—
—
—
—
6,128,116
13,545,470
Total state revenues
13,545,470
6,128,116
—
—
19,673,586
—
—
320,786
3,659,333
—
—
—
47,847
—
28,327,268
14,207
—
2,300,940
—
—
294,225
2,300,940
28,327,268
334,993
4,001,405
3,980,119
47,847
28,341,475
2,595,165
34,964,606
19,321,786
6,310,367
28,341,475
2,799,912
56,773,540
59,697
1,921,849
308,844
13,241
3,219,120
1,355,799
880,640
246,787
—
4,174,757
816,337
20,851,846
—
1,144,918
267,075
1,838,564
3,278,817
8,597,323
2,272,896
22,950,438
10,751,328
—
—
862,715
2,452
263,906
3,222,800
286,226
1,599,433
10,964
2,400
(136,047)
14,847,807
291,078
1,727,292
—
12,209,475
413,939
—
—
105,914
(106)
49,471
383,578
—
3,797
22,503
(106)
12,262,743
925,934
Total expenditures
25,678,373
6,937,333
31,384,342
3,154,174
67,154,222
Deficit of revenues over
expenditures
(6,356,587)
(626,966)
(3,042,867)
(354,262)
(10,380,682)
3,866,338
(7,598,276)
810,938
—
—
(411,276)
475,267
—
5,152,543
(8,009,552)
(10,088,525)
183,972
(3,454,143)
121,005
(13,237,691)
31,482,862
69,336
8,846,245
(185,088)
40,213,355
21,394,337
253,308
5,392,102
(64,083)
26,975,664
Total federal revenues
Local revenues:
Food service sales
Bookstore sales
Interest
Other
Total local revenues
Total revenues
Expenditures:
Current:
Academic salaries
Classified salaries
Employee benefits
Books and supplies
Contract services, student grant, and
other operating expenditures
Utilities
Other
Capital outlay and equipment replacement:
Land
Building
Equipment
Other financing sources:
Transfers in
Transfers out
Net increase (decrease) in fund
balances
Fund balances at July 1, 2002
Fund balances at June 30, 2003
$
See accompanying independent auditors’ report.
40
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Debt Service Fund
Balance Sheet
June 30, 2003
Assets
Cash held with trustee
Due from other funds
Total assets
$
60,569,332
887,271
$
61,456,603
Liabilities and Fund Equity
Liabilities:
Reserve for refunding certificates of participation
24,569,964
Total liabilities
24,569,964
Fund equity:
Capital projects
Debt service
25,043,401
11,843,238
Total fund equity
36,886,639
Total liabilities and fund equity
$
See accompanying independent auditors’ report.
41
61,456,603
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Debt Service Fund
Statement of Revenues, Expenditures, and Changes in Fund Balances
Year ended June 30, 2003
Revenue:
Interest
$
Total local revenues
1,523,592
1,523,592
Expenditures:
Current:
Contracted services and other operating expenditures
Debt service:
Principal
Interest
3,506,207
42,030,000
4,331,558
Total expenditures
49,867,765
Deficit of revenues over expenditures
(48,344,173)
Other financing sources:
Transfers in
Proceeds from issuance of debt
15,546,802
43,650,000
Total other financing sources
59,196,802
Increase in fund balances
10,852,629
Fund balances at July 1, 2002
26,034,010
Fund balances at June 30, 2003
$
See accompanying independent auditors’ report.
42
36,886,639
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Building Fund
Balance Sheet
June 30, 2003
Assets
Cash in County Treasury
Cash in banks
Investments
Accounts, notes, interest, and loans receivable,
net of allowance for doubtful accounts
$
25,705,921
3,010,715
464,793,752
134,169
Total assets
$
493,644,557
$
12,312,271
Liabilities and Fund Equity
Liabilities:
Accounts payable
Total liabilities
12,312,271
Fund equity:
Reserved for capital expenditures
481,332,286
Total fund equity
481,332,286
Total liabilities and fund equity
$
See accompanying independent auditors’ report.
43
493,644,557
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Building Fund
Statement of Revenues, Expenditures, and Changes in Fund Balances
Year ended June 30, 2003
Local revenues:
Interest
$
Total revenues
22,654,890
22,654,890
Expenditures:
Contract services, student grant, and other operating expenditures
Capital outlay and equipment replacement:
Buildings
Construction in progress
Other
7,913,199
818
54,904,304
1,604,357
Total expenditures
64,422,678
Net decrease in fund balances
(41,767,788)
Fund balances at July 1, 2002
523,100,074
Fund balances at June 30, 2003
$
See accompanying independent auditors’ report.
44
481,332,286
See accompanying independent auditors’ report.
Total liabilities and fund equity
Total fund equity
Fund equity:
Investment in fixed assets
Fund balances – designated for future
expenditures
Total liabilities
Liabilities:
Accounts payable
Deferred revenue
Long-term liabilities (note 2)
Scholarship and trust
Liabilities and Fund Equity
Total assets
Cash in banks
Investments
Accounts, notes, interest, and receivable,
net of allowance for doubtful accounts
Capital assets
Assets
$
$
$
$
319,704
1,539,924
343,769
319,704
202,876
234,045
—
24,065
1,305,879
31,169
13,204
—
—
10,861
514
12,068
—
1,293,297
343,769
20,571
—
5,503
31,169
1,539,924
323,198
—
Los Angeles
City College
281,359
1,221,893
East
Los Angeles
College
LOS ANGELES COMMUNITY COLLEGE DISTRICT
374,801
365,893
363,864
2,029
8,908
—
—
—
8,908
374,801
—
2,029
13,811
358,961
Los Angeles
Harbor
College
45
166,859
69,507
69,507
—
97,352
350
—
—
97,002
166,859
378
—
166,481
—
Los Angeles
Mission
College
June 30, 2003
1,174,593
651,468
467,680
183,788
523,125
6,437
—
—
516,688
1,174,593
803
183,788
98,541
891,461
Los Angeles
Pierce
College
Combined Balance Sheet
176,790
86,520
37,526
48,994
90,270
9,594
—
—
80,676
176,790
33,134
48,994
36,820
57,842
Los Angeles
Southwest
College
Expendable Trust Fund – Associated Student Organization Funds and Agency Funds
1,571,434
833,572
833,572
—
737,862
89,142
—
648,720
—
1,571,434
—
—
1,065,209
506,225
Los Angeles
Trade
Technical
College
1,404,588
986,566
805,049
181,517
418,022
418,022
—
—
—
1,404,588
—
181,517
1,221,313
1,758
Los Angeles
Valley
College
468,645
190,200
146,587
43,613
278,445
11,292
1,201
—
265,952
468,645
—
49,819
418,826
—
West Los
Angeles
College
Total
7,221,403
3,737,475
3,246,365
491,110
3,483,928
548,555
13,269
648,720
2,273,384
7,221,403
60,389
497,316
3,625,558
3,038,140
Total revenues
See accompanying independent auditors’ report.
234,045
Fund balances at June 30, 2003
17,119
216,926
Fund balances at July 1, 2002
Net increase (decrease) in
fund balances
319,704
161,516
158,188
70,292
70,292
228,480
77,786
60,667
1,926
226,554
Los Angeles
City College
365,893
394,670
(28,777)
66,827
66,827
38,050
5,793
32,257
Los Angeles
Harbor
College
46
69,507
—
69,507
15,982
15,982
85,489
1,153
84,336
Los Angeles
Mission
College
651,468
645,242
6,226
167,175
167,175
173,401
12,751
160,650
Los Angeles
Pierce
College
Year ended June 30, 2003
86,520
67,675
18,845
15,499
15,499
34,344
521
33,823
Los Angeles
Southwest
College
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
1,976
75,810
60,667
$
$
Total expenditures
Expenditures:
Contract services and other operating
expenditures
Revenues:
Interest
Other
East
Los Angeles
College
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Expendable Trust Fund – Associated Student Organization Funds and Agency Funds
833,572
968,946
(135,374)
231,009
231,009
95,635
27,759
67,876
Los Angeles
Trade
Technical
College
986,566
987,750
(1,184)
84,453
84,453
83,269
38,758
44,511
Los Angeles
Valley
College
190,200
145,387
44,813
81,205
81,205
126,018
3,529
122,489
West Los
Angeles
College
3,737,475
3,588,112
149,363
793,109
793,109
942,472
94,166
848,306
Total
OTHER SUPPLEMENTAL INFORMATION
THIS PAGE LEFT INTENTIONALLY BLANK
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Organization
June 30, 2003
The Los Angeles Community College District was established on July 1, 1969 and is comprised of an area
of approximately 882 square miles located in Los Angeles County. There were no changes in the
boundaries of the District during the year. The District currently operates nine colleges as follows:
•
East Los Angeles College
•
Los Angeles City College
•
Los Angeles Harbor College
•
Los Angeles Mission College
•
Los Angeles Pierce College
•
Los Angeles Southwest College
•
Los Angeles Trade Technical College
•
Los Angeles Valley College
•
West Los Angeles College.
The board of trustees for the fiscal year ended June 30, 2003 was comprised of the following members:
Board of trustees
Name
Mona Field
Georgia L. Mercer
Sylvia Scott-Hayes
Warren T. Furutani
Kelly G. Candaele
Nancy S. Pearlman
Michael D. Waxman
Stacey L. McMullen
Office
President
Vice President
Member
Member
Member
Member
Member
Student Member
Term expires
June 2007
June 2007
June 2007
June 2007
June 2005
June 2005
June 2005
May 2004
Administration
Dr. Mark Drummond, Chancellor
Mr. Peter Landsberger, Senior Vice Chancellor
Dr. Mary E. Lee, Executive Director, Facilities Planning and Development
Ms. Camille Goulet, General Counsel
Ms. Jeanette L. Gordon, Controller
47
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Organization
June 30, 2003
College Presidents
Mr. Ernest Moreno
Dr. Mary Spangler
Dr. Linda Spink
Dr. Adriana Barrera
Mr. Darroch “Rocky” Young
Dr. Audre Levy
Dr. Daniel Castro
Dr. Tyree Wieder
Mr. Francisco Quiambao
East Los Angeles College
Los Angeles City College
Los Angeles Harbor College
Los Angeles Mission College
Los Angeles Pierce College
Los Angeles Southwest College
Los Angeles Trade Technical College
Los Angeles Valley College
West Los Angeles College
48
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Full-Time Equivalent Students and Apprenticeship Clock Hours
Year ended June 30, 2003
The District operates nine community colleges within the County of Los Angeles. The schedule of workload
measures for both state residents (program-based funding) and nonresidents is as follows:
Resident
reported data
Categories:
Credit full-time equivalent students (FTES):
Weekly census
Daily census
Actual hours of attendance
Independent study/work experience
Summer intercession
Total
Noncredit FTES:
Actual hours of attendance
Summer intercession
70,754
7,655
4,119
926
5,829
2,612
201
45
9
162
89,283
3,029
6,260
1,185
Total
7,445
Fall census credit student headcount
Gross square footage – existing facilities
FTES in leased (or rented) space of less than 100%
128,013
5,018,711
1,420
Apprenticeship clock hours
Total hours
annual report
Reporting periods
July 1, 2002 – December 31, 2002
January 1, 2003 – April 15, 2003
April 16, 2003 – June 30, 2003
17,389
—
18,232
35,621
49
Nonresident
reported data
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Reconciliation of Annual Financial and Budget Report (CCFS 311)
Year ended June 30, 2003
Balance
June 30, 2003 total net assets per annual financial budget report
$
Adjustments and reclassifications increasing (decreasing) fund balance:
Booked to adjust the prior year’s fund balance:
To reinstate prior year debt
To adjust prior year workers’ compensation
To adjust prior year deferred lease payable
To reinstate prior year fixed assets
To adjust for prior year COPs proceeds
To record prior year deferred revenue and other liability
To reverse prior year receivable
To correct prior year bond costs
To accrue for prior year interest
To reclass prior year reserve to equity – part-time faculty health insurance
To reclass prior year reserve to equity – COPs proceeds
To reclass prior year reserve to equity – bookstore fund
584,052,101
(650,648,225)
(4,011,000)
3,291,201
269,167,000
24,569,965
(8,225,945)
(11,996)
(257,798)
(1,612,746)
772,346
6,451,183
3,044,027
June 30, 2003 unaudited ending fund balance
226,580,113
Current period’s audit adjustments:
To record deferred enrollment fees
To record general liability expense based on the actuarial study
To write off old accounts receivable
To establish a reserve for accounts receivable
To reclass prior year reserve to equity – bookstore fund
To record bookstore inventory and facility reserve in equity
To record current year additions to workers’ compensation
To record current year additions to compensated absences
To record current year depreciation expense
To record current year additions to workers’ compensation and compensated
absences
To record current year capital asset additions
To record current year interest payment on general obligation bonds
To reverse current year expense for principal payments on debt
To record net change in accrued interest as of June 30, 2003
(1,099,751)
(1,689,524)
(453,154)
(9,774,234)
845,058
(2,167,892)
(16,806,747)
(1,898,331)
(12,895,875)
6,474,970
70,209,129
17,970,000
3,077,467
(505,496)
51,285,620
June 30, 2003 audit adjusted ending fund balance
$
50
277,865,733
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Expenditures of Federal and State Awards
Year ended June 30, 2003
General Fund
U.S. Department of Education:
Direct programs:
Higher Education Act:
Strengthening institutions
Student support services
Upward Bound
Comprehensive Program
Student financial assistance:
Pell Grant
FSEOG
Federal work-study
Pass-through State:
Vocational and Applied Technology Education Act:
Title IC
Title II
Title II
Title IB
Federal
CFDA
or project
number
Federal
84.031
84.042
84.047
84.116
U.S. Department of Labor:
Pass-through City:
Welfare to Work Project – 101628
Welfare to Work Project – 101674
Welfare to Work Project – 102585
Welfare to Work Project – CF21927
WTW Child Care Service Promo – 101664
WIA City of Inglewood Voucher System
WIA Catholic Charities – 11-7009
WIA
WIA Com Career Title I – Adult – 101896
WIA Com Career Title I – Dislocated – 101896
Expenditures
—
—
—
—
4,045,401
1,208,044
1,896,668
326,609
3,960,837
1,208,044
1,896,360
326,609
84.063
84.007
84.033
63,785
107,167
2,422,353
—
—
—
63,785
107,167
2,422,353
87,336
108,673
2,293,307
84.048
84.048
84.243
84.048
4,870,984
755,708
248,254
3,824
—
—
—
—
4,870,984
755,708
248,254
3,824
4,680,826
771,848
282,666
1,301
15,948,797
—
15,948,797
15,617,807
319,786
18,426
53,972
22,775
3,856
452,899
17
268,011
605,613
576,470
—
—
—
—
—
—
—
—
—
—
319,786
18,426
53,972
22,775
3,856
452,899
17
268,011
605,613
576,470
102,227
18,426
53,972
23,290
3,856
670,459
17
274,160
605,613
574,891
2,321,825
—
2,321,825
2,326,911
17.253
17.253
17.253
17.253
17.253
17.257
17.257
17.257
17.258
17.260
Subtotal pass-through City
Pass-through County:
WIA Community Jobs Project, Probation
Total
4,045,401
1,208,044
1,896,668
326,609
Subtotal U.S. Department of
Education
17.257
$
Revenue recognized
State
248,036
—
248,036
248,036
248,036
—
248,036
248,036
Subtotal U.S. Department of Labor
2,569,861
—
2,569,861
2,574,947
U.S. Department of Health and Human Services:
Direct program:
Nursing Loan Program
Pass-through National Collegiate Association:
National Youth Sports
93,358
—
93,358
301,403
77,805
—
77,805
88,013
171,163
—
171,163
389,416
123,196
—
17,078
—
—
—
123,196
—
17,078
123,196
6,940
17,078
140,274
—
140,274
147,214
669,850
85,631
—
—
669,850
85,631
669,850
85,631
755,481
—
755,481
755,481
222,966
—
222,966
222,966
222,966
—
222,966
222,966
19,808,542
—
19,808,542
19,707,831
Subtotal pass-through County
93.570
Subtotal U.S. Department of
Health and Human Services
National Science Foundation:
Direct programs:
Chemical Technology
Advanced Technology Education
Tech Math for Tomorrow
47.076
47.076
47.076
Subtotal National Science Foundation
U.S. Department of Housing and Urban Development:
Direct programs:
Hispanic Serving Institution
Child Development Work-Study
14.514
14.512
Subtotal U.S. Department of
Housing and Urban Development
U.S. Department of State – Bureau of Educational
and Cultural Affairs:
TRIO
84.344
Subtotal U.S. Department of State
Total federal
51
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Expenditures of Federal and State Awards
Year ended June 30, 2003
Federal
CFDA
or project
number
State assistance programs:
Disabled Students Program and Services
State Matriculation
Instructional Equipment/Modern Technology:
One-Time Block Grant
Instructional Equipment/Deferred Maintenance
Extended Opportunity Program and Services
Temporary Assistance Needy Families Programs
CalWORKS Program, 2000-2001
Telecommunication and Technologies
Economic Development
Fund for Student Success
Transfer and Articulation Program
Other state assistance programs
Federal
$
Total state assistance programs
Total General Fund
Revenue recognized
State
Total
Expenditures
—
—
5,031,505
4,609,457
5,031,505
4,609,457
5,338,883
4,986,893
—
—
83,592
—
—
—
20,625
—
—
254,572
—
1,526,125
5,745,969
955,700
4,533,188
1,186,150
1,946,386
546,678
96,216
7,226,031
—
1,526,125
5,829,561
955,700
4,533,188
1,186,150
1,967,011
546,678
96,216
7,480,603
1,736,486
1,136,039
5,849,650
897,693
5,319,513
1,868,390
1,937,539
602,935
88,087
6,732,883
358,789
33,403,405
33,762,194
36,494,991
20,167,331
33,403,405
53,570,736
56,202,822
204,747
—
204,747
204,747
204,747
—
204,747
204,747
155,361
2,574,900
—
—
155,361
2,574,900
163,559
1,425,906
Special Revenue Fund
U.S. Department of Agriculture:
Direct programs – nonmajor programs:
Summer Food Service
10.555
Subtotal U.S. Department of
Agriculture
U.S. Federal Emergency Management Administration
Pass-through State:
Hazard Mitigation Grants
Public Assistance Grants
83.548
83.544
Total U.S. Federal Emergency Management
Administration
2,730,261
—
2,730,261
1,589,465
Total federal
2,935,008
—
2,935,008
1,794,212
—
—
—
—
—
2,142,598
228,220
189,166
151,373
1,172,231
2,142,598
228,220
189,166
151,373
1,172,231
2,153,122
204,571
190,239
189,610
1,170,347
State assistance programs:
Child Development Pre-School Care
Child Care Food Programs
Child Development Services
Child Development Block Grant
Family Child Care Homes Network
Total state assistance programs
Total Special Revenue Fund
—
3,883,588
3,883,588
3,907,889
2,935,008
3,883,588
6,818,596
5,702,101
59,315,951
4,058,483
—
2,088,305
—
—
—
—
59,315,951
4,058,483
—
2,088,305
56,866,840
4,073,629
3,876,489
1,883,552
65,462,739
—
65,462,739
66,700,510
—
—
—
4,552,393
4,449,259
—
4,552,393
4,449,259
—
4,579,979
4,476,450
—
—
9,001,652
9,001,652
9,056,429
65,462,739
9,001,652
74,464,391
75,756,939
Student Financial Aid Fund
U.S. Department of Education:
Pell Grant
Direct Loan
Federal Perkins Loan Program
FSEOG
84.063
84.268
84.038
84.007
Total U.S. Department of Education
State assistance programs:
CAL grants
Extended Opportunity and Services
Other programs
Total state assistance programs
Total Student Financial Aid Fund
Grand total – Federal
$
88,206,289
—
88,206,289
88,202,553
Grand total – State assistance programs
$
358,789
46,288,645
46,647,434
49,459,309
Grand total – All funds (General, Special
Revenue, Financial Aid)
$
88,565,078
46,288,645
134,853,723
137,661,862
See accompanying independent auditors’ report.
52
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Schedule of Expenditures of Federal and State Awards
Year ended June 30, 2003
(1)
General
The accompanying Schedule of Expenditures of Federal and State Awards presents the activity of all
federal and state financial assistance programs of the Los Angeles Community College District. The Los
Angeles Community College District reporting entity is defined in the District’s basic financial statements.
All federal financial assistance received directly from federal agencies as well as federal financial
assistance passed through other government agencies is included in the schedule.
(2)
Basis of Accounting
The accompanying Schedule of Expenditures of Federal and State Awards is presented using the
modified-accrual basis of accounting.
(3)
Reconciliation to Financial Statements
Amounts reported in the accompanying schedule agree with the amounts reported in related financial
statements, with the exception of state revenues, which can be reconciled to the annual financial report, as
follows:
Total state revenues in accompanying schedule
$
Add:
General Fund:
Basic and equalization aid
State lottery
Tax relief subvention
Other state funds
236,109,421
13,937,885
1,574,420
1,187,900
Total other General Fund revenues
252,809,626
Special Revenue Fund:
Community College Construction Act
Scheduled Maintenance Program
State share of TANF
Other state funds
9,560,371
3,785,099
477,850
2,527,250
Total other Special Revenue Fund revenues
Total state revenues in fund financial statements
(4)
46,288,645
16,350,570
$
315,448,841
Loan Advances
For the year ended June 30, 2003, the District advanced loans totaling $495,779 for the Federal Perkins
Loans Program (CFDA Number 84.038). As of June 30, 2003, the District had an outstanding loan balance
of Federal Perkins Loans in the amount of $3,876,489.
53
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Notes to Schedule of Expenditures of Federal and State Awards
Year ended June 30, 2003
(5)
Nursing Student Loans
During the year ended June 30, 2003, the District processed approximately $50,967 of new loans under the
Student Nursing Program. As of June 30, 2003, the District had an outstanding loan balance of Nursing
Student Loans in the amount of $301,403.
54
INDEPENDENT AUDITORS’ REPORT ON STATE COMPLIANCE
REQUIREMENTS
THIS PAGE LEFT INTENTIONALLY BLANK
KPMG LLP
Suite 2000
355 South Grand Avenue
Los Angeles, CA 90071-1568
Independent Auditors’ Report on State Compliance Requirements
We have examined Los Angeles Community College District’s (the District) compliance with the
following compliance requirements based on Section 400 (revised July 2003) of the California Community
Colleges’ Contracted District Audit Manual during the year ended June 30, 2003, except the requirements
discussed in the third paragraph of this report:
•
Salaries of Classroom Instructors (50% law)
•
Apportionment for Instructional Service Agreements/Contracts
•
Required Data Elements
•
Rendering Determination for Credit Loans
•
Students Actively Enrolled
•
Concurrent Enrollment of K-12 Students in Community College Credit Loans
•
Uses of Matriculation Funds
•
Allocation of Costs (DSP&S and EOP&S)
•
EOPS Administrator/Director Requirements
•
Gann Limit Calculation
•
Enrollment Fee
•
Scheduled Maintenance Program
•
Open Enrollment.
Management is responsible for the District’s compliance with those requirements. Our responsibility is to
express an opinion on the District’s compliance based on our examination.
We did not audit the District’s compliance with requirements governing the concurrent enrollment of K-12
students in community college credit courses. Based on representations from the District, the required audit
procedures were peformed by another accounting firm whose report has been provided to us. The District’s
compliance with the requirements governing the concurrent enrollment of K-12 students in community
college credit courses was examined by other accountants whose report has been furnished to us. The
report of the other accountants indicates that compliance with those requirements was examined in
accordance with attestation standards established by the American Institute of Certified Public
Accountants. Based on our review of the independent accountant’s report on applying agreed upon
procedures, we have determined that such report contains findings of noncompliance with the guidelines
noted in Section 400 (revised July 2003) of the California Community College’s Contracted District Audit
Manual. However, the scope of our work did not extend to the compliance requirements tested by the other
auditors. Since we did not apply auditing procedures to satisfy ourselves as to compliance with those
requirements, the scope of our work was not sufficient to enable us to express, and we do not express, an
opinion on compliance with the requirements governing the concurrent enrollment of K-12 students in
community college credit courses.
55
KPMG LLP, a U.S. limited liability partnership, is the U.S.
member firm of KPMG International, a Swiss cooperative.
Our examination was conducted in accordance with attestation standards established by the American
Institute of Certified Public Accountants and, accordingly, included examining, on a test basis, evidence
about the District’s compliance with those requirements and performing such other procedures as we
considered necessary in the circumstances. We believe that our examination provides a reasonable basis for
our opinion. Our examination does not provide a legal determination on the District’s compliance with
specified requirements and did not extend to the District’s compliance with the requirements governing the
concurrent enrollment of K-12 students in community college credit courses which was examined by other
accountants.
Management is responsible for the District’s compliance with those requirements. Our responsibility is to
express an opinion on the District’s compliance based on our examination.
Our examination was conducted in accordance with attestation standards established by the American
Institute of Certified Public Accountants and, accordingly, included examining, on a test basis, evidence
about the District’s compliance with those requirements and performing such other procedures as we
considered necessary in the circumstances. We believe that our examination provides a reasonable basis for
our opinion. Our examination does not provide a legal determination on the District’s compliance with
specified requirements.
In our opinion, the District complied, in all material respects, with the aforementioned requirements for the
year ended June 30, 2003. However, the results of our examination procedures disclosed instances of
noncompliance with those requirements which are described in the accompanying schedule of state
findings and recommendations as findings S-03-01, S-03-02, and S-03-03.
This report is intended solely for the information and use of the District’s Board of Trustees, management,
and federal and state awarding agencies and pass-through entities and is not intended to be and should not
be used by anyone other than these specified parties.
December 31, 2003
56
ADDITIONAL REPORTS OF INDEPENDENT AUDITORS
THIS PAGE LEFT INTENTIONALLY BLANK
KPMG LLP
Suite 2000
355 South Grand Avenue
Los Angeles, CA 90071-1568
Report on Compliance and on Internal Control
over Financial Reporting Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing Standards
The Honorable Board of Trustees
Los Angeles Community College District
Los Angeles, California:
We have audited the basic financial statements of the Los Angles Community College District (the
District) as of and for the year ended June 30, 2003 and have issued our report thereon, dated
December 31, 2003. We conducted our audit in accordance with auditing standards generally accepted in
the United States of America and the standards applicable to financial audits contained in Government
Auditing Standards issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether the Los Angeles Community College District’s
basic financial statements are free of material misstatement, we performed tests of its compliance with
certain provisions of laws, regulations, contracts, and grants, noncompliance with which could have a
direct and material effect on the determination of financial statement amounts. However, providing an
opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not
express such an opinion. The results of our tests disclosed no instances of noncompliance that are required
to be reported under Government Auditing Standards.
Internal Control over Financial Reporting
In planning and performing our audit, we considered the District’s internal control over financial reporting
in order to determine our auditing procedures for the purpose of expressing our opinion on the financial
statements and not to provide assurance on internal control over financial reporting. Our consideration of
internal control over financial reporting would not necessarily disclose all matters in internal control over
financial reporting that might be material weaknesses. A material weakness is a condition in which the
design or operation of one or more internal control components does not reduce to a relatively low level the
risk that misstatements in amounts that would be material in relation to the financial statements being
audited may occur and not be detected within a timely period by employees in the normal course of
performing their assigned functions. We noted no matters involving internal control over financial
reporting and its operation that we consider to be material weaknesses.
57
KPMG LLP, a U.S. limited liability partnership, is the U.S.
member firm of KPMG International, a Swiss cooperative.
A material weakness is a condition in which the design or operation of one or more internal control
components does not reduce to a relatively low level the risk that misstatements in amounts that would be
material in relation to the financial statements being audited may occur and not be detected within a timely
period by employees in the normal course of performing their assigned functions. Our consideration of
internal control over financial reporting would not necessarily disclose all matters in internal control that
might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions,
that are also considered material weaknesses. However, we believe that none of the reportable conditions
described above is a material weakness.
This report is intended solely for the information and use of the board of trustees, management, and federal
awarding agencies and pass-through entities and is not intended to be and should not be used by anyone
other than these specified parties.
December 31, 2003
58
KPMG LLP
Suite 2000
355 South Grand Avenue
Los Angeles, CA 90071-1568
Report on Compliance with Requirements Applicable
to Each Major Program and on Internal Control
over Compliance in Accordance with OMB Circular A-133
The Honorable Board of Trustees
Los Angeles Community College District
Los Angeles, California:
Compliance
We have audited the compliance of the Los Angeles Community College District (the District) with the
types of compliance requirements described in the U.S. Office of Management and Budget (OMB)
Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the
year ended June 30, 2003. The District’s major federal programs are identified in the summary of auditors’
results section of the accompanying schedule of findings and questioned costs. Compliance with the
requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is
the responsibility of the District’s management. Our responsibility is to express an opinion on the District’s
compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to financial audits contained in Government Auditing
Standards issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133
require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance
with the types of compliance requirements referred to above that could have a direct and material effect on
a major federal program occurred. An audit includes examining, on a test basis, evidence about the
District’s compliance with those requirements and performing such other procedures as we consider
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our
audit does not provide a legal determination of the District’s compliance with those requirements.
In our opinion, the District complied, in all material respects, with the requirements referred to above that
are applicable to each of its major federal programs for the year ended June 30, 2003. However, the results
of our auditing procedures disclosed instances of noncompliance with those requirements, which are
required to be reported in accordance with OMB Circular A-133 and which are described in the
accompanying schedule of findings and questioned costs as items F-03-1 through F-03-3.
59
KPMG LLP, a U.S. limited liability partnership, is the U.S.
member firm of KPMG International, a Swiss cooperative.
Internal Control over Compliance
The management of the District is responsible for establishing and maintaining effective internal control
over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal
programs. In planning and performing our audit, we considered the District’s internal control over
compliance with requirements that could have a direct and material effect on a major federal program in
order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to
test and report on internal control over compliance in accordance with OMB Circular A-133.
Our consideration of internal control over compliance would not necessarily disclose all matters in internal
control that might be material weaknesses. A material weakness is a condition in which the design or
operation of one or more internal control components does not reduce to a relatively low level the risk that
noncompliance with applicable requirements of laws, regulations, contracts, and grants that would be
material in relation to a major federal program being audited may occur and not be detected within a timely
period by employees in the normal course of performing their assigned functions. We noted no matters
involving internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the Board of Trustees, management, and the
federal and state awarding agencies and pass-through entities and is not intended to be and should not be
used by anyone other than these specified parties.
December 31, 2003
60
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Findings and Questioned Costs
Year ended June 30, 2003
(1)
Summary of Auditors’ Results
(a)
The type of report issued on the financial statements: Unqualified opinion.
(b)
Reportable conditions in internal control were disclosed by the audit of the basic financial
statements: None reported.
Material weaknesses: None noted.
(c)
Noncompliance which is material to the basic financial statements: None noted.
(d)
Reportable conditions in internal control over major programs: None reported.
Material weaknesses: None noted.
(e)
The type of report issued on compliance for major programs: Unqualified opinion.
(f)
Any audit findings which are required to be reported under Section 510(a) of OMB Circular A-133:
Yes, See Findings F-03-01 to F-03-03.
(g)
Major programs:
•
U.S. Department of Education Student Financial Assistance Cluster
CFDA #84.033 – Federal Work-Study Program
CFDA #84.063 – Federal Pell Grant Program
CFDA #84.268 – Federal Direct Loan Program
CFDA #84.007 – Federal Supplemental Educational Opportunity Grants (FSEOG)
CFDA #84.038 – Federal Perkins Loan Program
•
(2)
Strengthening Institutions (CFDA #84.031).
(h)
Dollar threshold used to distinguish between Type A and Type B programs: $2,520,740.
(i)
Auditee qualified as a low-risk auditee under Section .530 of OMB Circular A-133: Yes.
Findings Relating to the Financial Statements Reported in Accordance with Government Auditing
Standards
None Noted
61
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Findings and Questioned Costs
Year ended June 30, 2003
(3)
Summary of Current Year Findings and Questioned Costs Relating to Federal Awards
Finding F-03-01 – Financial Aid Review
Programs affected:
•
•
•
•
•
CFDA #84.048 Federal Perkins Loan
CFDA #84.007 FSEOG
CFDA #84.268 Federal Direct Loan
CFDA #84.063 Federal Pell Grant
CFDA #84.033 Federal Work-Study Program.
Condition
We noted that a staff member is to review all student financial aid files to ensure the completeness of basic
financial aid information, such as the FAFSA, Social Security number, and the like. The staff member is to
sign off on the cover of each Financial Aid Packet to indicate his/her review. However, during our internal
control test work at one of the colleges, we noted that 4 files out of 60 selections were not signed off by the
staff member during the first review. The entire Financial Aid Packet goes through a secondary review by
a Financial Aid Technician who verifies the accuracy and completeness of the documents and then signs
off on the packet. We noted that a Financial Aid Technician is to review all student financial aid files to
ensure the completeness of financial aid information, such as the ISIR, SAP Progress, and the like. The
Financial Aid Technician is supposed to sign off on the cover of each Financial Aid Packet to indicate
his/her review. However, we noted that 28 files out of 60 selections were not signed off by the Financial
Aid Technician during the second review.
Recommendation
All student financial aid files should be reviewed by a staff member to ensure that all the required
information is included in each file. The staff member should also sign off on each packet cover so that if
any concerns arise with the reviewed file, the Financial Aid Manager will know who performed the review.
The financial aid office cannot be assured that all files are being properly reviewed if the Financial Aid
Technician is not properly signing off on each student financial aid packet cover. Also, if any concerns
arise with any of the reviewed files, the Financial Aid Manager will know who performed the review by
looking at the Financial Aid Technician’s initials.
We recommend that every student financial aid file is properly reviewed and signed off by the financial aid
staff members. This review is important as it is better to resolve these obvious inaccuracies in the
beginning phases of the financial aid process and it is also important to sign off on each packet so that the
Financial Aid Manager can be assured that all files are properly reviewed.
We recommend that every student financial aid file be properly signed off by the Financial Aid Technician.
District’s Response
The District concurs with the finding and will implement the recommendations noted above.
62
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Findings and Questioned Costs
Year ended June 30, 2003
Questioned Costs
None.
Finding F-03-02 – Federal Work-Study Contracts
Program affected: Federal Work-Study Program (CFDA #84.033)
Condition
The District’s colleges recontract with each outside organization every year for the Federal Work-Study
(FWS) Program. The colleges initiate the contract request with the District office contracts department,
who draws up the formal agreement and gets the required signatures. The original signed contracts are
maintained at the District office, with copies at the campus level. At one of the colleges tested, we noted
that the contracts between the District and the Benjamin Franklin Branch of the Los Angeles Public
Library and the LA County Probation Department were only signed by the outside organizations and not
by the District. We also noted that the college did not obtain a contract request form for two outside
organizations, Benjamin Franklin Branch of the Los Angeles Public Library and the LA County Probation
Department.
Criteria
Federal Work-Study students may be employed by the institution, a federal, state or local agency a private
not-for-profit organization or a private for-profit organization. The employment must not, (1) impair
existing service contracts, (2) displace employees, (3) fill jobs that are vacant because the employer’s
regular employees are on strike, or (4) involve the construction, operation, or maintenance of any part of a
facility used or to be used for religious worship or sectarian instruction. The institution must enter into a
written agreement with any agency or organization providing employment under the Federal Work Study
(FWS) program (34 CFR Sections 675.20 and 675.23).
Recommendation
The college should complete the contract request form for each outside employer so that the college
ensures that a contract is requested for off-campus employers. Additionally, the college should ensure that
all contracts with outside employers have been fully executed and signed before students are allowed to
work at these organizations. Failure to obtain a signature from the District on contracts that the college is
involved with could indicate that the District has not reviewed or accepted such contract. It is important to
have the District review and accept all contracts the college is involved with in case future problems arise.
District’s Response
The District has the processes and procedures in place to require that all contracts with outside employers
be executed before students are allowed to work. The District will ensure that all contracts with outside
employers are properly executed.
Questioned Costs
None.
63
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Findings and Questioned Costs
Year ended June 30, 2003
Finding F-03-03 – Return of Title IV Funds for Student Financial Aid
Programs affected:
•
•
•
•
•
CFDA #84.048 Federal Perkins Loan
CFDA #84.007 FSEOG
CFDA #84.268 Federal Direct Loan
CFDA #84.063 Federal Pell Grant
CFDA #84.033 Federal Work-Study Program.
Condition
At one of the colleges tested, we noted that the college’s calculation of the return of Title IV funds for
certain students was calculated incorrectly. As the District has made the assertion that it is an institution
that is “not required to take attendance,” the midpoint of the semester (i.e., 50% completion point) is only
to be used when the student is dropped from his/her classes without notification. However, we noted that
these calculations should not have been based on the 50% completion as the students either dropped
courses in person or by telephone (as evidenced by the S004 printout).
Criteria
As noted in 34 CFR Part 668.22, if a recipient of Student Financial Aid (SFA) grant or loan funds
withdraws from a school after beginning attendance, the amount of SFA grant or loan assistance earned by
the student must be determined. If the amount disbursed to the student is greater than the amount the
student earned, unearned funds must be returned. If the amount disbursed to the student is less than the
amount the student earned, the student is eligible to receive a postwithdrawal disbursement of the earned
aid that was not paid.
As noted above, the District has made the assertion that it is an institution that is “not required to take
attendance.” For institutions that are not required to take attendance, a student’s withdrawal date is one of
the following:
•
The date the student began the withdrawal process prescribed by the institution.
•
The date the student otherwise gave (in writing or orally) official notification of the institution of his
or her intent to withdraw.
•
If the student never began the withdrawal process or otherwise gave notice of intent to withdraw, the
midpoint of the payment period or period of enrollment.
•
If the student did not begin the withdrawal process or otherwise given notification (including notice
from someone acting on the student’s behalf) to the institution of the intent to withdraw because of
circumstances beyond the student’s control (e.g., illness, accident, grievous personal loss, and the
like), the date based on the circumstances related to the withdrawal.
•
If a student who was granted an approved leave of absence fails to return from the leave of absence,
the date the institution determines the approved leave of absence began.
64
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Findings and Questioned Costs
Year ended June 30, 2003
•
If a student takes an unapproved leave of absence, the date the student began the unapproved leave
of absence.
Finally, an institution has the option of using as the withdrawal date a date that can be documented based
on the student’s attendance at an academically related activity. If an institution chooses to use attendance at
an academically related activity as the student’s date of withdrawal, the institution must document both
that the activity is academically related and that the student attended the activity.
Effect
By not consistently and accurately applying the Department of Education guidelines and criteria, the
amount of Student Financial Aid that is owed back by the student and institution may be inaccurate. The
amount of Title IV funds required to be returned by 7 of the 100 students tested would have changed by
$6,447 if the aforementioned college had followed the guidelines for institutions not required to take
attendance and used the actual withdrawal dates communicated by the students.
Recommendation
It is recommended that the District ensure its current guidelines on the calculation for the Title IV funds to
be returned are followed by the colleges within the District.
Questioned Costs
$2,314
District Response
The District concurs with the finding and will ensure that all colleges apply its current guidelines on the
calculation for the Title IV funds to be properly returned to the Department of Education.
65
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SCHEDULE OF STATE FINDINGS AND RECOMMENDATIONS
THIS PAGE LEFT INTENTIONALLY BLANK
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of State Findings and Recommendations
Year ended June 30, 2003
Finding
numbers
Not
implemented
Fully
implemented
1. Enrollment Fees
S-03-01
X
2. Matriculation – College Matriculation Plans
S-03-02
X
3. Students Actively Enrolled
S-03-03
X
1. Enrollment Fees
S-02-01
X
2. Apportionment for Instructional Service
Agreements/Contracts – East Los Angeles
College
S-02-02
X
3. Students Actively Enrolled
S-03-03
X
4. Students Actively Enrolled
S-02-04
5. Matriculation – Matching Separate from
Categorical Programs
S-02-05
X
6. Matriculation – Level of Efforts
S-02-06
X
7. Matriculation – Record Retention
S-02-07
X
8. Payroll Procedures Manual
S-02-08
X
State Findings and Recommendations
Current Year Comment
Prior Year Comments
X
Current Year State Findings and Recommendations
Finding S-03-01
Observation
Consistent with prior years, the District does not report part of fees collected for the summer term as
revenues in the following fiscal year. The District reports fees collected for the summer terms as current
revenue. It was noted that approximately $1 million of summer fees collected and recorded as current
revenue should have been deferred. An adjustment was recorded to properly reflect this amount on the
District’s basic financial statements.
66
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of State Findings and Recommendations
Year ended June 30, 2003
Recommendation
It is recommended that the District record as current revenue only those fees collected for the summer term
that falls within the fiscal year. The remaining portion of the fees collected should be deferred and reported
as revenues in the subsequent fiscal year.
District’s Response
The District concurred with the finding as to the state requirements for deferring all summer enrollment
fees in the following years. However, the District disagreed with the state compliance requirement to defer
all summer fees collected in the fiscal year following the summer term. The District will implement
policies to defer a portion of the summer term fees collected before June 30, where the services are
provided on or after July 1.
Finding S-03-02 – Matriculation – College Matriculation Plans
Observation
The District is required to expend matriculation funds in accordance and consistent with the District’s
campus state approved matriculation plans. The plans contain an outline of the activities that are being
performed to carryout the matriculation program. These activities should be consistent with approved
activities listed under California Code of Regulation (CCR), Title 5, Chapter 6, Article 3 Matriculation
Services, Section 55520, Required Services. Reportable instances occur if claimed activities are not
consistent with allowable activities. Per review of the District’s Colleges’ plans, it was noted that all
activities are not consistent with “activities claimable against state matriculation funds.” It was also noted
that the State Chancellor’s office made updates in activities claimable in 2003, which the District did not
incorporate into their colleges plans. One college plan was last updated in 1990 and three others were last
updated in 1994.
Effect
The District’s colleges may be performing activities under their Matriculation Programs that are no longer
allowable, thus may not claimable against the state matriculation funds.
Recommendation
We recommend that the District review their current Credit and Non-Credit Matriculation Plans against the
current plan guidance and submit updates to the State Chancellor’s Office accordingly to ensure
compliance with State approved activities.
District Response
The District concurs with the finding and will implement as recommended.
67
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of State Findings and Recommendations
Year ended June 30, 2003
Finding S-03-03 – Students Actively Enrolled
Observation
The total number of students counted for census purposes in the 72 course sections tested was 2,511. This
number included 26 students who should have been excluded as they were not actively enrolled. There
were also two exclusion rosters which could not be located that represented 18 and 22 students,
respectively.
Effect
As the Los Angeles Community College District (District) receives apportionment based on the number of
FTES reported to the state. Over reporting the number of FTES to the state can lead to the incorrect
apportionment being made to the District.
Recommendation
To avoid noncompliance with the Students Actively Enrolled requirement, KPMG recommends that
measures be taken by the District to ensure that exclusion rosters are properly collected and recorded.
Specific instructions should be given to instructors regarding importance of accurate completion and timely
submission of the rosters and instruction to those charged with entry of the information regarding effective
dates to be used to ensure proper exclusion. Consideration should also be given to maintaining records of
exceptions encountered when exclusion rosters are entered automatically through the scanning and batch
entry process performed by the District’s DEC system.
District’s Response
Increased efforts by the Colleges have improved the timely collection of exclusion rosters; and Information
Technology has developed two improvements to the process. Colleges can now identify sections with
missing exclusion rosters on a computer screen rather than from printouts. Also, a field has been added to
the District’s section information files to record the status of processed exclusion rosters. In future terms,
staff will more easily be able to identify, filter, sort, and update this information for improved monitoring
and earlier intervention.
68
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Prior Year State Findings
Year ended June 30, 2003
PRIOR YEAR STATE FINDINGS AND RECOMMENDATIONS
Finding S-02-01 – Enrollment Fees
Observation
Consistent with prior years, the District does not report part of fees collected for the summer term as
revenues in the following fiscal year. The District reports fees collected for the summer terms as current
revenue. It was noted that approximately $1.09 million of summer fees collected and recorded as current
revenue should have been deferred. An adjustment was recorded to properly reflect this amount on the
District’s basic financial statements.
Recommendation
It is recommended that the District record as current revenue only those fees collected for the summer term
that falls within the fiscal year. The remaining portion of the fees collected should be deferred and reported
as revenues in the subsequent fiscal year.
District’s Response – Current Status of Prior Year Management Letter Comment
The District concurred with the finding as to the state requirements for deferring all summer enrollment
fees in the following years. However, the District disagreed with the state compliance requirement to defer
all summer fees collected in the fiscal year following the summer term. The District still needs to
implement policies to defer a portion of the summer term fees collected before June 30, where the services
are provided on or after July 1.
This finding was repeated in the current year (see Finding S-03-01).
69
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Prior Year State Findings
Year ended June 30, 2003
Finding S-02-02 – Apportionment for Instructional Service Agreements/Contracts – East Los Angeles
College
Observation
On reviewing the General Catalog and schedules of classes for East Los Angeles College (ELAC) to
ensure compliance with the requirement that courses be “ . . . open and published in the official general
college catalog and/or agenda and listed in the schedules of classes,” KPMG noted that courses offered
through ELAC under contract with the L.A. County Sheriff’s Department are listed in the general catalog
but not in the schedules of classes.
Effect
The failure to include the classes in the schedules of classes is an oversight on the part of ELAC, rather
than an attempt to deliberately exclude anyone from access to the classes. However, such oversight may
put ELAC at the risk of not being compliant with this portion of the requirement.
Recommendation
To avoid any noncompliance, KPMG recommends that all future classes offered under contracts between
the Los Angeles Community College District College and any outside entity be included in the General
Catalog as well as the schedules of classes of the appropriate college.
District’s Response – Current Status of Prior Year Finding
The District has corrected this finding. The Fall Schedule 2003 on page 27 has the following statement
printed under Administration of Justice offerings: “Additional Administration of Justice courses have been
scheduled after publishing deadlines. Many of these are advanced courses that require prerequisites. A free
supplementary list of these courses is available by calling 323-265-8834.”
For the Spring 2004 full schedule, the statement was omitted. But for the Spring 2004 schedule on the
“ELAC. Edu” web site, the statement is listed under the Administration of Justice Department section. The
statement is also blocked and has special notation. For the Spring 2004 mini schedule, the statement is
listed on page 4.
70
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Prior Year State Findings
Year ended June 30, 2003
Finding S-02-03 – Students Actively Enrolled
Observation
During our review of the alphabetical student list for Fall 01, course Section – C0361, KPMG noted the
name “Third,” student with ID number 333-33-3333. Test students (fictitious names with SS numbers such
as 111-11-1111) are used to check system functionality and are supposed to be deleted after the test. Third,
Student with ID number 333-33-3333 is one such test student that was erroneously not deleted.
Effect
KPMG notes that this failure to delete the test student resulted in one additional student being counted
amongst those actively enrolled in the course section. This resulted in one additional FTES reported to the
State.
Recommendation
To avoid noncompliance with the Students Actively Enrolled requirement, KPMG recommends that
measures be taken by the District to ensure that any fictitious students entered into the system for test
purposes be deleted upon completion of such tests. For example, KPMG recommends a periodic search of
ID numbers to identify “unusual” IDs.
District’s Response – Current Status of Prior Year Finding
To facilitate checking, the Admissions and Records group recommended using a uniform naming
convention of “Test” for both first and last name for such entries.
71
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Prior Year State Findings
Year ended June 30, 2003
Finding S-02-04 – Students Actively Enrolled
Observation
The total number of students counted for census purposes in the 50 course sections tested was 1,775. This
number included thirty-eight (38) students (aggregating 2.14% of our sample) who should have been
excluded as they were not actively enrolled.
Effect
As the Los Angeles Community College District (District) receives apportionment based on the number of
FTES reported to the state. Overreporting the number of FTES to the state can lead to the incorrect
apportionment being made to the District.
Recommendation
To avoid noncompliance with the Students Actively Enrolled requirement, KPMG recommends that
measures be taken by the District to ensure that exclusion rosters are properly collected and recorded.
Specific instructions should be given to instructors regarding importance of accurate completion and timely
submission of the rosters and instruction to those charged with entry of the information regarding effective
dates to be used to ensure proper exclusion. Consideration should also be given to maintaining records of
exceptions encountered when exclusion rosters are entered automatically through the scanning and batch
entry process performed by the District’s DEC system.
District’s Response – Current Status of Prior Year Finding
Increased efforts by the Colleges have improved the timely collection of exclusion rosters, and Information
Technology has developed two improvements to the process. Colleges can now identify sections with
missing exclusion rosters on a computer screen rather than from printouts. Also, a field has been added to
the District’s section information files to record the status of processed exclusion rosters. In future terms,
staff will more easily be able to identify, filter, sort, and update this information for improved monitoring
and earlier intervention.
This finding was repeated in the current year (see Finding S-03-03).
72
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Prior Year State Findings
Year ended June 30, 2003
Finding S-02-05 – Matriculation – Matching Separate from Categorical Programs
Observation
The District does not separately track the matching requirements for each program in the general ledger.
All matching funds for the various programs are included in the General Fund. Reports are filed with
various state and federal agencies with paper allocations (not recorded in the general ledger) as to dollar
amounts used to meet matching requirements.
Effect
By not tracking the District matching expenditures separately, the District is unable to determine if they are
double counting matching requirements with all of their programs with matching requirements being
lumped into the General Fund.
Recommendation
Although it appears that the District meets the matching requirement due to the level of expenditures in the
General Fund, KPMG recommends that the District develop a system to track the matching requirements
for all of its programs separately. This can be done either on an excel spreadsheet or by utilizing the
general ledger account structure within the general fund to segregate the expenses used to meet the various
matching requirements.
District’s Response – Current Status of Prior Year Finding
A procedure has been placed to track the matching requirements for the Colleges. It will be based on the
matriculation-related expenditures/activities and in accordance with the state guidelines. These activities
are tracked by functional areas and general ledger accounts. This process of tracking will segregate the
expenses used for matching requirements in the General Fund.
73
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Prior Year State Findings
Year ended June 30, 2003
Finding S-02-06 – Matriculation – Level of Efforts
Observation
The District is required to maintain a level of effort of District-matched expenditures greater than the
1986/87 District level or an amount that is greater for each of the last five years. The District does not track
the level of expenditures for this program separately in the general ledger and was unable to recreate this
information from the paper reports submitted, due to loss of records from the Colleges.
Effect
The District is not able to determine if they are in compliance with the state requirement of level of effort
for the Matriculation program.
Recommendation
KPMG recommends that the District monitor this requirement at the District level by working with the
Colleges and keeping copies of reports submitted by the Colleges. The District should compute the
required match each year to ensure that they will be in compliance with state requirements.
District’s Response – Current Status of Prior Year Finding
The District was able to identify from the District’s archived database the related matriculation
expenditures for fiscal year 1986/87. The related matriculation expenditures for fiscal year 2002-2003 were
greater than fiscal year 1986-1987. The District has worked with the Colleges to monitor that this
requirement has copies of reports submitted by the Colleges.
74
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Schedule of Prior Year State Findings
Year ended June 30, 2003
Finding S-02-07 – Matriculation – Record Retention
Observation
LACCD District office does not maintain copies of the required state annual reports or supporting
documentation for those reports. It relies upon each of the colleges to maintain this documentation. Neither
the District office nor the Colleges were able to produce requested copies of reports or supporting
documentation.
Federal and state funding agencies require recipients to maintain copies of reports and supporting
documentation for potential audit purposes for a period of 3-5 years, depending on the agency and
program.
Effect
In the event that the state were to audit these programs and the Colleges were unable to produce the
supporting documents for these reports, state funding to the District could be adversely impacted.
Recommendation
KPMG recommends that the District develop a monitoring program for its Colleges for the programs
where they perform their own reporting. They should request that copies (paper or electronic) of all
required federal and state reports be sent to the District office to assist in monitor that the campuses are
meeting their reporting requirements and not jeopardizing federal or state funding.
District’s Response – Current Status of Prior Year Finding
The District was able to locate the missing expenditure reports. Copies of the last five-year period reports
will be maintained in the District’s files.
75
REPORT TO MANAGEMENT
THIS PAGE LEFT INTENTIONALLY BLANK
Telephone 213 972 4000
Fax 213 622 1217
KPMG LLP
Suite 2000
355 South Grand Avenue
Los Angeles, CA 90071-1568
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Report to Management
Year ended June 30, 2003
December 31, 2003
The Honorable Board of Trustees
Los Angeles Community College District
Los Angeles, California
Members of the Board:
We have audited the basic financial statements of Los Angeles Community College District (the District)
for the period ended June 30, 2003 and have issued our report thereon dated December 31, 2003. In
planning and performing our audit of the basic financial statements of the District, we considered internal
control in order to determine our auditing procedures for the purpose of expressing our opinion on the
financial statements. An audit does not include examining the effectiveness of internal control and does not
provide assurance on internal control. We have not considered internal control since the date of our report.
A material weakness is a condition in which the design or operation of specific internal control components
does not reduce to a relatively low level the risk that errors or fraud in amounts that would be material in
relation to the financial statements being audited may occur and not be detected within a timely period by
employees in the normal course of performing their assigned functions. Our consideration of internal
control would not necessarily disclose all matters in internal control that might be material weaknesses
under standards established by the American Institute of Certified Public Accountants. However, we noted
no matters involving internal control and its operation that we consider to be material weaknesses as
defined above.
During the completion of our procedures, we noted certain matters involving internal control and other
operational matters that are presented for your consideration. These comments and recommendations, all of
which have been discussed with the appropriate members of management, are intended to improve internal
control or result in other operating efficiencies and are summarized in the following report to management
on pages 77 to 84.
* * * * * * *
Our audit procedures are designed primarily to enable us to form an opinion on the financial statements,
and therefore may not bring to light all weaknesses in policies or procedures that may exist. We aim,
however, to use our knowledge of the organization gained during our work to make comments and
suggestions that we hope will be useful to you.
We would be pleased to discuss these comments and recommendations with you at any time.
This report is intended solely for the information and use of the Board of Trustees, District, management,
and others within the organization.
Very truly yours,
76
KPMG LLP, a U.S. limited liability partnership, is the U.S.
member firm of KPMG International, a Swiss cooperative.
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Report to Management
Year ended June 30, 2003
Not yet
implemented
Partially
implemented
Fully
implemented
Current Year Comments
1.
Financial Reporting
2.
New
Accounting
Statement No. 39
X
Pronouncement –
GASB
X
3.
Lack of Formal IT Strategic Plan
X
4.
SAP Application Security
X
5.
SAP Password Controls
X
Prior Year Comments Carried Forward to the Current
Year
6.
Capital Assets – Building Improvements
7.
Recording of Capital Leases
X
8.
Accurately Record Lease Information in Logbook
X
X
Current Status of Other Prior Year Comments
Accounting
9.
Schedule of Federal and State Awards
X
10.
Ensure Proper Accrual of Vacation Leave Earned
but not taken
X
11.
Internal Audit Function/Audit Budget Committee
X
12.
Payroll Procedures Manual
X
Information Technology
13.
Users Should Sign-off on Their User Acceptance
Tests
X
77
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Report to Management
Year ended June 30, 2003
Not yet
implemented
Partially
implemented
Fully
implemented
Security
14.
Terminated User Listing
15.
Set FILE_ACCESS and FILE_ACCESS:FAILURE
Audit Qualifiers on The VMS System
X
Set the CAPTIVE Flag for the VMS BACKUP ID
X
16.
X
Operations
17.
Backup Should Be Monitored More Closely
X
CURRENT YEAR COMMENTS
(1)
Financial Reporting
Observation
Effective July 1, 2001, the District implemented new financial reporting changes established by the
Governmental Accounting Standards Board (GASB) Statement No. 34, Financial Statements—and
Management’s Discussion and Analysis—for State and Local Governments, and GASB Statement No. 35,
Basic Financial Statements—and Management’s Discussion and Analysis—for Public Colleges and
Universities. The District currently maintains its internal financial reporting on the modified accrual basis
of accounting and converts these records to the accrual basis of accounting in accordance with the
provisions of GASB Statement Nos. 34 and 35 for year-end external reporting purposes. The District’s
SAP financial system is not currently configured to automatically convert the District’s records from the
modified basis of accounting to the accrual basis of accounting. As such, the year-end conversion of the
District’s accounting records to comply with the provisions of GASB Statement Nos. 34 and 35 requires an
very labor intensive effort to manually perform this conversion process. Due to limited resources at the
District’s disposal, an extended period of time is required to complete the aforementioned conversion
process.
Recommendation
We recommend that the District examine its current GAAP conversion process and the adequacy of
accounting resources for preparing GAAP financial statements to ensure the necessary steps are taken to
enable the District to timely produce financial records in accordance with the provisions of GASB
Statement Nos. 34 and 35. In addition, we recommend the District continue to analyze their current
systems capabilities to automate the year-end GAAP conversion process. Improvement of the District’s
financial reporting processes, resources, and capabilities will help to ensure both accurate and timely
reporting.
78
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Report to Management
Year ended June 30, 2003
District Response
The District concurs with this finding.
(2)
New Accounting Pronouncement – GASB Statement No. 39
Observation
Determining Whether Certain Organizations Are Component Units an Amendment of GASB Statement
No. 14. As noted in GASB Statement No. 39, an objective of Statement No. 14, The Financial Reporting
Entity, is that all entities associated with a primary government (i.e., the District) are potential component
units and should be evaluated for inclusion in the financial reporting entity. GASB Statement No. 39
amends GASB Statement No. 14 to provide additional guidance to determine whether certain organizations
for which the primary government is not financially accountable should be reported as component units
based on the nature and significance of their relationship with the primary government. Generally, it
requires reporting, as a component unit, an organization that raises and holds economic resources for the
direct benefit of a governmental unit. Organizations that are legally separate, tax-exempt entities and that
meet all of the following criteria should be discretely presented as the District’s component units. These
criteria are:
(1)
The economic resources received or held by the separate organization are entirely or almost
entirely for the direct benefit of the District, its component units, or its constituents.
(2)
The District, or its component units, is entitled to, or has the ability to otherwise access, a
majority of the economic resources received or held by the separate organization.
(3)
The economic resources received or held by an individual organization that the specific
primary government, or its component units, is entitled to, or has the ability to otherwise
access, are significant to the District.
This statement continues the requirement in Statement No. 14 to apply professional judgment in
determining whether the relationship between a primary government and other organizations for which the
primary government is not financially accountable and that do not meet these criteria is such that exclusion
of the organization would render the financial statements of the reporting entity misleading or incomplete.
Those component units should be reported based on the existing blending and discrete presentation display
requirements of Statement No. 14. The provisions of this statement are effective for financial statements
for periods beginning after June 15, 2003.
Recommendation
We recommend that the District analyze each legally separate tax-exempt entity it is affiliated with to
determine if any of the entities meet all of the criteria noted above. This analysis should include the
Foundations at each campus. For those entities meeting all of the criteria noted above and in GASB
Statement No. 39, each organization will need to be audited and presented as a discretely presented
component unit in the District’s June 30, 2004 audited financial statements.
79
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Report to Management
Year ended June 30, 2003
District Response
The District concurs with the finding and currently has Administrative Regulations for Auxiliary
Organizations established by the Board of Trustees in accordance with Education Code Section 72672 ©
and California Administrative Code, Title 5, Sections 59255 and 59257. These regulations require the
above-mentioned reviews in addition to the requirement to have an independent audit done annually. One
copy of this audit is sent to the State Chancellor’s office and one copy is kept on file in the Controller’s
office.
(3)
Lack of Formal IT Strategic Plan
Observation
During our review, we noted that the District has not developed a formal IT strategic plan to support the
District’s overall business strategy.
Without a formal IT strategic plan that supports the District’s future business strategy, the District faces the
risk of poor IT project planning, unplanned resource shortages, and a misalignment between IT and
business operations.
Recommendation
We recommend that management develop a short and long term IT strategic plan that is aligned with the
District’s overall business strategy. The IT strategic plan should address business systems that will be
needed in the future to assist the District in meeting its overall business goals. Specifically, an IT strategic
plan should consider, at a minimum, the following topics:
•
Technological Infrastructure Planning – The IT strategic plan should encompass aspects such as
systems architecture, technological direction, and migration strategies.
•
Future Trends and Regulations – The IT strategic plan should consider future trends and regulatory
conditions that may effect an organization’s operations.
•
Technological Infrastructure Contingency – The IT strategic plan should consider aspects of
business contingency (i.e., redundancy, resilience, adequacy and evolutionary capability of the
infrastructure).
•
Hardware and Software Acquisition Plans – The IT strategic plan should consider hardware and
software acquisition plans that reflect the organization’s business needs.
•
Technology Standards – The IT strategic plan should define technology norms in order to foster
standardization.
District’s Response
The District concurs with the findings noted above. The Presidents Cabinet has recognized the need for
such a plan. At its December meeting, the Cabinet authorized moving forward with such a plan and asked
the President of Los Angeles Mission College to chair the plan's steering committee. The CIO is preparing
a project plan and has entered into discussions with a consultant to staff the project. The IT Strategic Plan
will be completed by the end of this calendar year.
80
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Report to Management
Year ended June 30, 2003
(4)
SAP Application Security
Observation
During our high-level review of SAP security, we noted the following weaknesses within the District’s
application security control environment:
•
14 users were inappropriately granted access to SAP’s ‘SAP_ALL’ profile (e.g. Consultants, SAP
User Support). We noted that users assigned to the ‘SAP_ALL’ profile could execute all SAP
transactions, including Basis (security) transactions, within the SAP system.
•
6 users were inappropriately granted access to enter a single journal entry (F-02) within the SAP
system (e.g. Consultants, District Office – Vice President).
•
9 users were inappropriately granted access to enter a multiple journal entries (FB50) within the SAP
system (e.g. Consultants, Mission – Academic Affairs).
Lack of proper security can potentially expose the District to an increased risk of unauthorized access to
transactions and data in SAP in the absence of effective controls over assigning access to users.
Recommendation
We recommend that management create a role-based SAP access matrix, which should list, at a minimum,
the transactions that should not be grouped together and profiles that should not be assigned together that
would result in a segregation of duties conflict. This matrix should be reviewed during the
maintenance/creation of profiles and during the assignment of user access.
A detailed review should be performed over the validity of all users and their access to SAP. This review
should be conducted to help ensure that only appropriate users have access to SAP and their access is in
line with their job responsibilities. In addition, users’ access should be reviewed against the SAP access
matrix to help ensure that user access is in compliance with the District’s segregation of duty polices.
Compensating controls will be required in situations where users may have segregation of duty conflicts,
but are required to have the access to perform their jobs. Based on the results of the review, management
should undertake appropriate steps to remove unauthorized users and make necessary adjustments to user
access to SAP.
District Response
The District concurs with the findings noted above. Infotech moved immediately to correct the weaknesses
upon verbal report from the auditors. The SAP_ALL profile accesses were removed for all users except
system administrators. The other two findings will be corrected by February 12, 2004 after review with the
SAP Financials support team.
81
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Report to Management
Year ended June 30, 2003
(5)
SAP Password Controls
Observation
Although management has been conscious of security around the network and application, e noted that
current SAP password configurations do not provide strong authentication control. Presently, passwords
are set to require a minimum length of 3 characters and user accounts are set to lock after twelve 12 failed
login attempts.
Without implementing strong authentication controls, the District’s financial system and sensitive data may
be expose to unauthorized users.
Recommendation
We recommend that management configure the SAP system to require a minimum password length of 6
characters. In addition, passwords should be allowed for only 3 login attempts. After 3 failed login
attempts, the account should be locked until the administrator unlocks it.
District Response
The District concurs with the findings noted above. Existing District authentication policy is consistent
with the auditor’s recommendation. SAP password controls were originally implemented with the
6-character, 3-login-attempts policy, but changed at some point. Infotech is investigating how the
implementation changed. Infotech will also establish a quarterly internal review of its security
implementation to insure against this in the future. The current control weakness will be corrected by
February 12, 2004.
Prior Year Comments
(6)
Capital Assets – Building Improvements
Observation
During our review of the District’s capital assets, we noted that approximately 30% ($56 million) of the
total net book value of building and improvements consisted of “miscellaneous” building improvements.
The District was unable to match the building improvements against a specific building. It is essential to
maintain records to demonstrate accountability for capital assets acquired. The general ledger for capital
assets should accurately reflect the physical assets on hand. Capital assets disposed of should be
appropriately removed from the general ledger. By not matching building improvements with specific
buildings, the District will be unable to remove building improvements from its books in the event that a
building is disposed of or demolished.
Recommendation
We recommend that the District devise a methodology for allocating the miscellaneous building
improvements toward specific buildings.
District Response
The District concurs with this finding and will implement the recommendation noted above.
82
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Report to Management
Year ended June 30, 2003
(7)
Recording of Capital Leases – Partially Implemented
Observation
During our test work, we noted that the District had forty (40) capital leases that had been recorded by the
District as operating leases. The assets had been included in the capital asset inventory but the related
obligations had been excluded from the financial statements. An adjustment was recorded to properly state
the capital lease obligations on the District’s financial statements.
Recommendation
We recommend that the District develop a method to properly identify and record capital leases. The
District should also establish an asset category as “assets held under capital leases” to properly track and
report assets held under capital leases obligations.
District Response
As recommended by the auditor in 2001, the District’s Contracts section follows Financial Accounting
Standards Board (FASB) Statement No. 13 in classifying leases as capital or operating at the time the
leases are executed and logged. This information is given to the Controller’s Office for financial reporting
purposes.
As for creating an asset category for “assets held under capital leases,” the District has been working to do
this as part of the implementation of the SAP financial system, which includes a function for identifying
such assets.
(8)
Accurately Record Lease Information in Logbook – Partially Implemented
Observation
During our test work of lease classification, within the procurement key process section, we noted that
property leases were not included in the lease log book. As the lease logbook is the District’s primary
source for information on lease liability, misstatements in the logbook can result in the understatement of
lease-related liability. Lack of monitoring leases could lead to inadequate disclosure and financial
statement misstatement. In addition, lack of monitoring leases entered into increases the risk that records
will be lost and lease payments could be incorrectly made after the lease term.
Recommendation
It is recommended that the District enhance procedures to ensure that leases are accurately recorded in the
lease logbook. The lease logbook should be reviewed by a supervisor and reconciled to the lease
agreements on a regular basis.
83
(Continued)
LOS ANGELES COMMUNITY COLLEGE DISTRICT
Report to Management
Year ended June 30, 2003
District’s Response
A Contracts Analyst now accurately records lease information in the logbook. The Manager of Contracts
and Purchasing periodically reviews the logbook and the Director of Business Services meets with the
Manager and Analyst after the annual audit to review any issues surrounding the recording of leases.
Regarding the monitoring of leases after they are executed, under the District’s system of decentralized
procurement this function is the responsibility of the locations requesting the leases. Therefore, for
example, a college that initiates a lease (whether operating or capital) for a photocopier is thereafter
responsible for keeping track of the lease term and payments and taking the appropriate actions at
lease-end.
84